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Did you not read my example? We are talking here about multiple, physically separated exchanges. Example: Vanguard sends a buy order of 1000 shares of AAPL to
by darawk 10y ago
Did you not read my example? We are talking here about multiple, physically separated exchanges.
Example:
Vanguard sends a buy order of 1000 shares of AAPL to exchange A. Some HFT firm sees that order on exchange A and knows that it will also be placed on exchange B, and was surely broadcast from Vanguard's trading floor at the exact same moment as the order to exchange A.
However, the HFT firm also knows that Vanguard is physically closer to exchange A then B, and the HFT firm has invested a lot of money to ensure that they have the physically shortest possible route from themselves to exchange B.
This allows them to broadcast their order to exchange B and have it arrive there before the order broadcast by Vanguard, even though they broadcast their order later.
It is somewhat difficult to wrap your head around, but it is a physical reality, and people are making millions of dollars from it as I write this.
- kasey_junk 10y agoA) 'yummyfajitas has worked in hft and written several blog posts on the subject. B) he is reacting specifically to the term front-running which has a known technical definition in trading and cannot happen the way you describe (I've said elsewhere I believe the term has been appropriated and redefined and am not willing to fight that anymore, maybe he is). C) it's funny that you mention Vanguard as they have been pretty adamant that HFT market makers of the form that use latency are save them money.
- yummyfajitas 10y agoHere's what the HFT actually sees: TRADE AAPL 1000@$96.98. He does not see "Vanguard" - the trade confirmation is anonymous. It could even be him! (Yes, you are subscribed to a multicast trade confirmation feed and even your own trade confirmations are anonymized.) He does not see Vanguard's physical location - for all he knows Vanguard is closer than he is. So actually, all the HFT knows is that someone bought some AAPL. Now what? Whenever someone buys AAPL he goes out and buys a bunch more? That doesn't sound like a moneymaking strategy to me. What evidence do you have that people are making millions of dollars from this as you write this? Michael Lewis?
- eru 10y ago> Now what? Whenever someone buys AAPL he goes out and buys a bunch more? Especially since for every seller there's also a buyer.