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Comment by ISL | Hacker News Reader

I'm a slow trader -- a few trades a year. I like, or at least don't mind, HFT.

It certainly doesn't hurt liquidity. There is, in principle, always someone who wants to trade with me, and the increased volume may make price-discovery a little more accurate.

When I place a limit order, I don't mind at all if someone has managed to front-run my order and sell it to me at the price I set. I got the thing I wanted to buy at the price I wanted to pay.

HFT is only troublesome if you play with fire -- market orders. The price you see may not be the price you get with a market order, as the market can do irrational things or front-run you. That risk is blunted entirely by limit orders. Your order might not fill, but when it does fill, it will only fill at or better than the price you asked.

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I'm pretty sure you misunderstand market orders because by definition they are only visible to the market after they have traded, so nobody can get ahead of you or do sonething irrational before your order lands.

I would agree that market orders are a bad idea at any meaningful volume (outaide of retail sizes) because of liquidity and routing reasons

> I'm pretty sure you misunderstand market orders because by definition they are only visible to the market after they have traded, so nobody can get ahead of you or do sonething irrational before your order lands.

Have you read Flash Boys? Dunno if the loop-holes have all been solved, but basically it was possible to front-run orders. There was a regulation requiring brokers to execute an order on the exchange that had the best current price. This rule gave no weight to size. So HFT firms could place a tiny, negative expectancy order on one exchange. Then they could see the result of that trade and cancel/place orders on the next exchange that your broker's matching algorithm was going to hit up before your order got there.

Yes, I work in the industry. Flash boys is misleading garbage, it's a long form advertisement for IEX.

What a broker does has nothing to do with how market orders work. The strategy you're describing also doesn't really work because any respectable broker is sweeping all of the exchanges at once - the regulations considered this possibility and allowed this behavior. Also, many of the liquid symbols have single cent spreads making this strategy impossible.

> What a broker does has nothing to do with how market orders work.

A market order submitted to a single exchange isn't the same as a "market order" submitted to e.g. Fidelity.com. He's talking about the latter.

Then this whole discussion is nonsensical since in almost all cases retail orders are directly filled by wholesale market makers and don't ever land on the exchanges (and don't see any 'frontrunning' as a result).

Sure. All I was saying is that it's theoretically possible for a market order that a customer submits online to be front-run (as opposed to a market order submitted to a single exchange). No clue how often it happens in practice.

It's theoretically possible and has always been for somebody to see order execution in progress and trade ahead of it. In practice, that's frequently just a side effect of somebody being so slow that their actions trigger quant algorithms, it's not a super profitable game trying to latency arb proper market sweeps anymore (not to say latency is not important in but, but it's usually for other reasons)

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