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let me be more specific since I think you're misinterpreting me because I wasn't specific enough. hedge-funds that execute a strategy based entirely on leverag

let me be more specific since I think you're misinterpreting me because I wasn't specific enough. hedge-funds that execute a strategy based entirely on leveraging HFT as a means to take advantage of information arbitrage (such as they kind that a fund taking trade orders from its clients would have) are predicated on having that information advantage "front-running". HFT in different contexts is just machine execution of trade orders and isn't what I was asking about.

tptacek 9y ago
That's not how a hedge fund works. Hedge funds trade on behalf of other people, but their clients have equity stakes in the fund itself; they're not asking the hedge fund to trade their own positions in things. Hedge fund customers don't inject tradable information. The canonical example of a front-runner is a broker trading on behalf of (say) a pension fund. The pension fund wants to offload (say) all its shares in CSCO, and pays a broker to do that. That trade is complicated and will move the market. The broker front-runs by first trading CSCO for its own accounts, at the expense of its clients. An "HFT-enabled" broker could front-run its own clients, but (a) they don't need HFT to do that; they have (relatively speaking) all the time in the world to act on the confidential information that their client is offloading a large block of CSCO, and (b) they're the ones complaining about HFT and setting up new exchanges to combat it.