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Are you saying front-running is not an HFT strategy? Because that is incorrect. In equities markets, for trades of a sufficient size it's not possible to plac

by nsedlet 10y ago

Are you saying front-running is not an HFT strategy? Because that is incorrect. In equities markets, for trades of a sufficient size it's not possible to place the order all at once. You'll hammer the order book, and take very suboptimal pricing for the latest marginal shares you buy/sell. Therefore you have to split up the order into chunks. HFT firms will try to detect when equities traders are doing this. e.g. If they see a pattern indicating that chunks of shares are being bought, they will try to buy, too. When the rest of the order comes through, the price will rise and that firm will make money. That's why "front-running" is just a special-case of an algorithm to predict price movements. I seriously doubt that a HFT fund as large as Rennaissance uses a single strategy, be it satellite images, or front-running or what-have-you.

pgwhalen 10y ago
>Are you saying front-running is not an HFT strategy? Because that is incorrect. I think dsl is quite familiar with the sort of HFT strategy you describe. I think s/he is just trying to correct your use of the term front-running, which was redefined by Michael Lewis et al. from its previous definition as the objectively illegal activity by a broker-dealer. Based on comments like yours, it's a losing battle.
yummyfajitas 10y ago
HFT firms will try to detect when equities traders are doing this. e.g. If they see a pattern indicating that chunks of shares are being bought, they will try to buy, too. Price discrimination against large traders - grandma gets a better price than Bill Ackman - is a valid and real HFT strategy. They do it in the manner you describe. But it's not front running. It's only front running when your agent (usually your broker) does it based on private information. Front running is just a term Michael Lewis misused in his misleading advertisement for IEX.

by nsedlet 10y ago

pgwhalen 10y ago

>Are you saying front-running is not an HFT strategy? Because that is incorrect. I think dsl is quite familiar with the sort of HFT strategy you describe. I think s/he is just trying to correct your use of the term front-running, which was redefined by Michael Lewis et al. from its previous definition as the objectively illegal activity by a broker-dealer. Based on comments like yours, it's a losing battle.

yummyfajitas 10y ago

HFT firms will try to detect when equities traders are doing this. e.g. If they see a pattern indicating that chunks of shares are being bought, they will try to buy, too. Price discrimination against large traders - grandma gets a better price than Bill Ackman - is a valid and real HFT strategy. They do it in the manner you describe. But it's not front running. It's only front running when your agent (usually your broker) does it based on private information. Front running is just a term Michael Lewis misused in his misleading advertisement for IEX.