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> Predatory traders detect information and split the profits with the counterparties (taking a cut in the process) No. No they do not. They detect the inform

> Predatory traders detect information and split the profits with the counterparties (taking a cut in the process) No. No they do not. They detect the information, and extract part of the value without improving the situation of the seller. The seller was going to get filled at $21 in either case, the only difference is that the front-runner bought and resold those shares to the "whale" buyer. This intellectual backflip is premised upon two mutually exclusive things happening: 1) the predator trades on information that there is demand coming and 2) in the counterfactual for the seller, that demand may never have come. But because the front-runner is cutting the line, they only place trades once the demand is in the order book. As a work of acrobatics, this is impressive. As an intellectual work, it is saddening.

yummyfajitas 13y ago
But because the front-runner is cutting the line, they only place trades once the demand is in the order book. There is no "cutting the line". If the demand were already in the order book the trade would have occurred. Please go read the tutorial before commenting further - you demonstrably do not understand how a matching engine works.
- thatthatis 13y ago
  I re read your article, and it appears I took information from your headline and assumed it into your examples. I think you're talking about plain vanilla market making and speculation. Nothing in there is what I would consider predatory or HFT or front running. These things exist, per my best reading of the wsj, and you said you were defending HFT but as best I can tell merely defended computerized market making and speculation.
  - dllthomas 13y ago
    The thing that is being called "front running" here involves multiple exchanges. There is no cutting in any single line. There is more then one line, and you can be in multiple simultaneously. In some cases, traders may go through one line and then complain that HFT traders went and got in the other line. In order to call that "cutting in line" and be well founded, you need to come up with some framework for how that "line" works - it does not fall trivially out of the actual lines in the two exchanges.

yummyfajitas 13y ago

But because the front-runner is cutting the line, they only place trades once the demand is in the order book. There is no "cutting the line". If the demand were already in the order book the trade would have occurred. Please go read the tutorial before commenting further - you demonstrably do not understand how a matching engine works.

thatthatis 13y ago
I re read your article, and it appears I took information from your headline and assumed it into your examples. I think you're talking about plain vanilla market making and speculation. Nothing in there is what I would consider predatory or HFT or front running. These things exist, per my best reading of the wsj, and you said you were defending HFT but as best I can tell merely defended computerized market making and speculation.
- dllthomas 13y ago
  The thing that is being called "front running" here involves multiple exchanges. There is no cutting in any single line. There is more then one line, and you can be in multiple simultaneously. In some cases, traders may go through one line and then complain that HFT traders went and got in the other line. In order to call that "cutting in line" and be well founded, you need to come up with some framework for how that "line" works - it does not fall trivially out of the actual lines in the two exchanges.