6 ms·

> In layman's terms, you see that someone will buy an asset, so you buy it first to artificially inflate the price, before selling afterwards at a profit. This

> In layman's terms, you see that someone will buy an asset, so you buy it first to artificially inflate the price, before selling afterwards at a profit. This sounds familiar. Isn't this a tactic used on the stock market as well? Something something microtransactions.

raziel2701 6y ago
I think they call it front running. It sounds similar to the stuff that high frequency traders can do and what market makers like citadel do when they buy the order flow from brokers.
- gruez 6y ago
  Payment for order flow =/= front-running. https://www.bloomberg.com/opinion/articles/2021-02-05/robinhood-gamestop-saga-pressures-payment-for-order-flow https://www.bloomberg.com/opinion/articles/2021-02-05/robinh...
  - justjonathan 6y ago
    I used to think that too, but this excellent piece from Matt Levine explains why that is not really the case: https://www.bloomberg.com/opinion/articles/2021-02-05/robinhood-gamestop-saga-pressures-payment-for-order-flow https://www.bloomberg.com/opinion/articles/2021-02-05/robinh... Retail traders benefit from this, and on Schwab, for example, they show you the dollars of price improvement the got you.
clipradiowallet 6y ago
The terms "wash trading" and "order stacking" come to mind, even though it's not strictly either of those things. It's more a combination of them. order stacking == placing bids(or asks), lots of them, that I have no intention of letting them fill. The reason I would place them is to falsely give the impression to retail traders that there are tons of buyers just waiting to snap something up...if you don't buy it first. The moment you buy it, I cancel them, and re-create them as asks. This tanks the price on the contract you just bought. wash trading == lots of transactions with yourself(or your partners), to give the impression of high levels of activity. This can lure other traders to place a trade they wouldn't otherwise place. front running == illegal with futures, I don't know about stocks. But the idea is this... I [as a broker or market maker] receive your orders to buy. I buy for myself before I execute your orders - your buy orders increase the price, which is good for my own position I opened initially.
- papercrane 6y ago
  > front running == illegal with futures, I don't know about stocks. "Front running" is only illegal if you're trading on private information. The classic example is a broker receives a large order from a client and before executing it they buy some of the same asset, assuming the clients larger order will drive the price up. If the information is public though it's not illegal. For example, index funds publicly disclose their balances, and if there is a large market event that means they need to rebalance other traders may rush orders in because they know the index fund is going to buy/sell certain instruments in large volumes. This is legal because all the information is public.

raziel2701 6y ago

I think they call it front running. It sounds similar to the stuff that high frequency traders can do and what market makers like citadel do when they buy the order flow from brokers.

gruez 6y ago
Payment for order flow =/= front-running. https://www.bloomberg.com/opinion/articles/2021-02-05/robinhood-gamestop-saga-pressures-payment-for-order-flow https://www.bloomberg.com/opinion/articles/2021-02-05/robinh...
- justjonathan 6y ago
  I used to think that too, but this excellent piece from Matt Levine explains why that is not really the case: https://www.bloomberg.com/opinion/articles/2021-02-05/robinhood-gamestop-saga-pressures-payment-for-order-flow https://www.bloomberg.com/opinion/articles/2021-02-05/robinh... Retail traders benefit from this, and on Schwab, for example, they show you the dollars of price improvement the got you.

clipradiowallet 6y ago

The terms "wash trading" and "order stacking" come to mind, even though it's not strictly either of those things. It's more a combination of them. order stacking == placing bids(or asks), lots of them, that I have no intention of letting them fill. The reason I would place them is to falsely give the impression to retail traders that there are tons of buyers just waiting to snap something up...if you don't buy it first. The moment you buy it, I cancel them, and re-create them as asks. This tanks the price on the contract you just bought. wash trading == lots of transactions with yourself(or your partners), to give the impression of high levels of activity. This can lure other traders to place a trade they wouldn't otherwise place. front running == illegal with futures, I don't know about stocks. But the idea is this... I [as a broker or market maker] receive your orders to buy. I buy for myself before I execute your orders - your buy orders increase the price, which is good for my own position I opened initially.

papercrane 6y ago
> front running == illegal with futures, I don't know about stocks. "Front running" is only illegal if you're trading on private information. The classic example is a broker receives a large order from a client and before executing it they buy some of the same asset, assuming the clients larger order will drive the price up. If the information is public though it's not illegal. For example, index funds publicly disclose their balances, and if there is a large market event that means they need to rebalance other traders may rush orders in because they know the index fund is going to buy/sell certain instruments in large volumes. This is legal because all the information is public.