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You're both correct. Front running has legal and illegal versions. Getting any non-public information and using it for trading purposes is illegal, however you

You're both correct. Front running has legal and illegal versions. Getting any non-public information and using it for trading purposes is illegal, however you can still front-run with public information. Markets react at different speeds and so do indexes, if your machine is set up closer to the exchange and has a faster algorithm you can front-run an index by using information about the changes in the index's stocks. In the case of this sort of information-speed arbitrage you're not making any stock analysis decisions, you just know an index has to respond a precise way to the stocks within it, and you're able to beat this information to the exchange and buy it ahead of the change.

growse 8y ago
As others have pointed out, taking a term that has a specific legal definition to relate to an illegal practice and broadening it to cover both legal and illegal activities doesn't seem like a great idea if your aim is to try and increase people's understanding of the markets. It just adds confusion. This is a shame, as your point about markets not being a level playing field because different participants are able to execute on information in different ways is worth making, especially in the context of new types of exchanges. An analogy would be to redefine all killings (lawful or otherwise) as "murder". It's not helpful. Words have specific meanings in specific contexts, so lets stop overloading them so much when we don't have to.
- Phillipharryt 8y ago
  Ok well technically front-running is a term used in the industry to specify a type of trading, it's not illegal in itself. However, you can front-run in an illegal way. Like driving a car isn't illegal but you can do it in an illegal manner. The act of front-running becomes illegal when you do it based on insider information, much like the driving becomes illegal when you speed. I hope this clears things up.
  - OldManAndTheCpp 8y ago
    To be very clear to all readers: front running is illegal. No one in the automated trading industry refers to the non-illegal trading that they do with a reference to illegal trading.
    - Phillipharryt 8y ago
      ok
    - tanderson92 8y ago
      As discussed elsewhere in this thread (search my nick), "no one" refers to frontrunning as encompassing both legal and illegal cases except the author of the definitive textbook on market microstructure.
      - Phillipharryt 7y ago
        Thank you, I gave up arguing it and was getting massively downvoted for my comments.

growse 8y ago

As others have pointed out, taking a term that has a specific legal definition to relate to an illegal practice and broadening it to cover both legal and illegal activities doesn't seem like a great idea if your aim is to try and increase people's understanding of the markets. It just adds confusion. This is a shame, as your point about markets not being a level playing field because different participants are able to execute on information in different ways is worth making, especially in the context of new types of exchanges. An analogy would be to redefine all killings (lawful or otherwise) as "murder". It's not helpful. Words have specific meanings in specific contexts, so lets stop overloading them so much when we don't have to.

Phillipharryt 8y ago
Ok well technically front-running is a term used in the industry to specify a type of trading, it's not illegal in itself. However, you can front-run in an illegal way. Like driving a car isn't illegal but you can do it in an illegal manner. The act of front-running becomes illegal when you do it based on insider information, much like the driving becomes illegal when you speed. I hope this clears things up.
- OldManAndTheCpp 8y ago
  To be very clear to all readers: front running is illegal. No one in the automated trading industry refers to the non-illegal trading that they do with a reference to illegal trading.
  - Phillipharryt 8y ago
    ok
  - tanderson92 8y ago
    As discussed elsewhere in this thread (search my nick), "no one" refers to frontrunning as encompassing both legal and illegal cases except the author of the definitive textbook on market microstructure.
    - Phillipharryt 7y ago
      Thank you, I gave up arguing it and was getting massively downvoted for my comments.