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I believe HFT is often used to front-run other trades. I don't think I'm crazy believing this, I would love to read something to convince me that this belief is
by drcode 6y ago
I believe HFT is often used to front-run other trades. I don't think I'm crazy believing this, I would love to read something to convince me that this belief is wrong.
- tptacek 6y agoWhy don't you start by telling us what you have read, about HFT and about the concept of front-running.
- rmrfstar 6y agoIt's a pretty simple concept. Net orderflow moves the price in the direction of the flow. Having foreknowledge of net flows implies knowledge of future price changes. Front-running is just trading on that knowledge. Here are some ways it happens: 1. A broker-dealer has client orders in its possession and trades ahead of them (classic front running) 2. A hedge fund with 2 portfolios trading correlated signals, one faster than the other (the Medallion-RIEF hypothesis) 3. Anticipate retails flows using behavioral advertising data or network intercepts from a statistically meaningful population (the Robintrack model) There are more, but they all share the same flavour. I wonder if Robinhood is sending retail orders to anyone running strategy 3.
- tptacek 6y agoWow.