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I work in HFT. We do not front run orders. We make money by finding correlated assets that when traded together, will create profits more often than not. Usual
by SkipperCat 5y ago
I work in HFT. We do not front run orders. We make money by finding correlated assets that when traded together, will create profits more often than not. Usually there is a mathematical relationship between the two (this is what the Black-Scholes model proved and won Nobel prize).
The reason that this trading style is called "High Frequency" is that everyone knows these relationships and therefore it's a race to get there first. Much like the scene from "Glengary Glen Ross", the first person who gets there gets a lot, the second person gets a nibble and the third person gets nothing.
The whole value of this is profits for the firm and high liquidity for everyone else. Not saying it's a noble pursuit, but we follow all the SEC, FINRA and other market regs (most importantly NBBO).
- speeder 5y agoSome HFT DO front run (after all, they got caught). But that is not what I was talking about even. I am talking about the firms that do spoofing, layering, etc... Basically a lot of HFTs that instead of just doing "daytrading" style trades or arbitrage, attempt to influence the market in some way, hopefully making the spreads bigger and whatnot.
- Kranar 5y agoCan you please list which firms you are aware of that got caught front running?