3 ms·
HFT machines don't get to know about regular orders until it is too late to preempt them. If an order takes liquidity, the first sign of it that an HFT machine
by anonymoushn 14y ago
HFT machines don't get to know about regular orders until it is too late to preempt them. If an order takes liquidity, the first sign of it that an HFT machine will see is the trade executing. If an order adds liquidity, the HFT machine will see the order appear on the book. Assuming that the venue uses time priority, which nearly all of them do, once the HFT machine is aware of the order it cannot get "ahead" of the order because the order has already received a timestamp that is lower than the present timestamp.
There may be some very minute portion of the industry that actually dedicates a lot of time to trying to predict specific actions of other market participants, but this seems like an awful idea to me. It would be much easier to try to predict the future price so you can avoid accumulating a large position in the wrong direction (as a market maker) or grab a big position in the right direction (as a speculator). It is also pretty easy to perform arbitrage, although this corner of the industry is harder to break into, since it requires more in the way of pricey hardware and data services and less in the way of strategy and predictive power.