2 ms·

1 - being faster isn't front running. Nobody can hop in front of orders that are already visible on the lit market. 2 - The electronic market makers ARE mostly

1 - being faster isn't front running. Nobody can hop in front of orders that are already visible on the lit market. 2 - The electronic market makers ARE mostly hft and generally get the best transaction costs and other privileges excluding taker-maker exchanges. Take NYSE parity or CME mass quotes for example 3 - Somewhat true but not in general. Becomes a murkier quality when hft is combined with longer term signals > These are NOT prediction of future price. HFT don't make money 'predicting' the market - they are too sophisticated as traders to believe that's reliably possible. It is to some extent, but its very hard and theirs is a better play. This is completely wrong. Plenty of HFTs do prediction to varying degrees, one of the biggest HFTs almost exclusively trades on price prediction. Other don't very much but hedge in very sophisticated manners. The smallest group is those who just use speed and fee structure to make money. There are certainly benefits to speed however (fill rate at the very least) and the market leaders are both intelligent AND fast.

kayhi 9y ago
1) yes, if a large order has to be fulfilled across multiple exchanges then there’s a race which HF can win
- KMag 9y ago
  But front-running has a very narrow regulatory / legal definition, which isn't met by latency arbitrage. Maybe you don't like what's going on, but to use the name of a crime to describe perfectly legal latency arbitrage is hyperbolic and/or ignorant.
- physguy1123 9y ago
  Nobody knows about a large order being filled cross multiple exchanges, at most they see a price level get filled at one exchange and take from that what they want. The majority of large cross-exchange orders are done via ISO orders which bypass routing mechanisms and exist for the sole purpose of executing large cross-exchange orders. Even if one doesn't want to lift the price, people trying to fill a large order generally route multiple orders to different exchanges. An HFT might see one price level go away before another even with the ISO mechanism, but it's far too late to act on that information by the time it's visible on the lit markets.

kayhi 9y ago

1) yes, if a large order has to be fulfilled across multiple exchanges then there’s a race which HF can win

KMag 9y ago
But front-running has a very narrow regulatory / legal definition, which isn't met by latency arbitrage. Maybe you don't like what's going on, but to use the name of a crime to describe perfectly legal latency arbitrage is hyperbolic and/or ignorant.
physguy1123 9y ago
Nobody knows about a large order being filled cross multiple exchanges, at most they see a price level get filled at one exchange and take from that what they want. The majority of large cross-exchange orders are done via ISO orders which bypass routing mechanisms and exist for the sole purpose of executing large cross-exchange orders. Even if one doesn't want to lift the price, people trying to fill a large order generally route multiple orders to different exchanges. An HFT might see one price level go away before another even with the ISO mechanism, but it's far too late to act on that information by the time it's visible on the lit markets.