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Front running is, very specifically, when an exchange uses information about its own customers' trades to profit. Example: Customer places an order to sell 1 m
by jpatokal 9y ago
Front running is, very specifically, when an exchange uses information about its own customers' trades to profit.
Example: Customer places an order to sell 1 million shares of Apple. Exchange shorts Apple, sells customer's shares causing price to go down, picks up cheaper shares to cover short.
HFTs don't do this, they just arbitrage between exchanges really quickly.