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1. You send a trade to your brokerage for GOOG 2. Trade gets routed to an HFT who will fill the trade 3. HFT notices a spike in GOOG interest over a few secon
by adambratt 13y ago
1. You send a trade to your brokerage for GOOG
2. Trade gets routed to an HFT who will fill the trade
3. HFT notices a spike in GOOG interest over a few seconds and starts buying at 1133.90 driving the price up to 1134
4. HFT fills your limit order at the best price of 1134 which they themselves hold.
Despite what the other commentators here have said, limit orders are less safe than market orders to market manipulation. HFT's will buy up all that dumb flow with limit orders and then essentially run the prices to the limit orders in their favor.
- foobarqux 13y agoAt the beginning of 3. does the HFT have your order or are you saying that the market moves before the HFT receives the order? As far as I know the first case is prohibited (actual front running). I don't see an obvious problem with the second case though there might be subtlety that I am missing.