Market-Maker existence impact to short-term informed directional trading

Question

How existence of market-maker affects short-term directional trading?

Normally when playing short-term directional we play against market marker that will cover losses from uninformed traders.

But when market-makers are not commonly present at exchange? In my opinion its moving game to middle and long-term only, because of transaction costs.

In other way, when market-making is zero-sum play that forces pay uninformed traders cost created by directional bets from informed traders, then short-term play will profit in general from uninformed traders costs. Based on that, it looks like its only moving profits from uninformed traders to informed that allow directional traders make more profit and trading at higher frequency.

Did I missing something here? Did market market existence in general allow play short-term directional strategy?

Answer 1

Market makers do exist when exchange don't pay rebates. The lack of rebates will cause the spread to be wider, enticing market makers to enter. There will just be a different "average spread" that represents the higher compensation requested by market makers to participate in a market without rebates.

Even if there were no traders acting as pure/dedicated market makers, there would still be limit orders by execution traders which can be adversely selected for profit by a good short-term directional algorithm (under a few assumptions...).

Unfortunately I didn't understand your last two paragraphs.