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Comment by kortilla | Hacker News Reader

> The fact that HFTs are so willing to invest in speed even to achieve a tiny advantage over other HFTs kind of gives the game away.

Re-pricing s&p500 futures offers in Chicago based on faster stock offer information from nyc is fine. It’s improving a market making strategy or taking offers that look like they will now be profitable.

> And when people quite rightly observe that having a speed advantage over other traders obviously allows extractive behavior like frontrunning

HFTs do not front run for fucks sake. It’s illegal and this meme needs to die. Front running is literally putting your order in front of a client’s order.

Being the fastest to realize the bottom is falling out of the s&p500 and selling the futures contracts on open bids is not front running.

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> HFTs do not front run for fucks sake. It’s illegal ...

This is objectively false. Cursing does not strengthen an argument. HFTs paid to jump the queue. It should be illegal but it is not. There are a number of low-latency strategies that are beneficial for price discovery such as index arbitrage or market-making (with requirements to stay in the market). A strategy that is not beneficial is to pay the exchange for first-look. That is front-running.

First look is still not front running. Unless you are able to get your order in before other orders, it’s not front running. Get it?

Being the first to look at new orders is nice, but the orders are in the queue so there is no way to get in front of them.

Here is a link to help you: https://www.investopedia.com/terms/f/frontrunning.asp

It’s very well-defined in the industry and when you complain about something completely unrelated using that term it muddies the argument for the general public and makes you sound ignorant to the people involved with the industry (both regulators and private participants).

I cursed because it’s the same ignorant argument over and over spreading false information about how the market functions. Actual front running is illegal and companies would get shut down in a heart beat if they were doing it.

Again, this is exactly the behavior I mentioned in the above post. When the general public raises the important question of how much extractive behavior there is in HFT and asks whether the benefits outweigh the value lost by disadvantaged parties, they get brushed off and told that they’re ignorant. Your response focuses on one specific technical allegation while casually admitting that yeah, maybe there’s another type of extractive behavior that happens but “don’t you know the difference between one technical definition of extractive behavior and another?” At the same time no actual answer is given to the core question — presumably the assumption being that unless you are in the HFT world you’re not qualified to have the question answered, even if it affects you and you’re paying for it.

i wonder this; if there is a stop loss already on the books at x price and a HFT enters a market order at that price when a stock is falling, which order will get filled first? i feel like answering this question would sort of answer the argument you guys are making?

as for useful work... we should really just be honest with ourselves/each other [and machine learning/ai might help us to do this] about what is actual useful work. it begs to challenge freedom, but ultimately i think we're headed for an efficiency level that will make the most efficacious worker look lazy af...

It’s simple though, stop claiming people are breaking the law (front-running) if you want to have a productive discussion. It’s not a “technical detail”, it’s a fundamental property of not being able to beat an order that made it to the exchange before yours.

The reason your concerns are brushed off is because they are nonsensical to anyone who actually understands the market. You’re complaining about extractive behavior but are unable to articulate how it is actually happening and calling it “front running” shows that you definitely have no idea how HFT is making money.

Describe the steps by which you think having something like first look or just faster access to the exchanges allows HFTs to unfairly extract money from normal trades.

There’s an entire book by Michael Lewis that describes these steps. I don’t have enough knowledge to tell you how accurate his description is, and I’d be willing to hear a cogent argument in response. But if you agree that those activities are indeed happening and you’re simply claiming that the abuses he describes are not technically illegal or technically the SEC definition of “front running” then your point is noted and my response is: so what? That’s not a defense against the allegations.

> There’s an entire book by Michael Lewis that describes these steps.

Yes, it was widely derided as a one-sided argument used to support a new exchange (i.e. it was glorified marketing material). It was an entertaining book, but it excluded any realistic view about how “the evil side” works in his narrative.

> then your point is noted and my response is: so what? That’s not a defense against the allegations.

The point is that there are no fucking allegations here. When someone comes out and says, “I don’t like HFTs because they front run orders,” and the reply is “that’s not front running”, what is left to defend? They are being accused of a crime they aren’t committing because people don’t know what the crime is.

It’s like claiming the 7-eleven extorted you into buying a hot dog because they offered a 2 for 1 sale. Then someone points out that isn’t extortion. Then you say “so what? That’s not a defense against the allegations.”

Let’s put this another way. There is a reason that no regulation or arrests came out of flash boys. When you actually look at what HFTs do, there is nothing “unfair” to regular market participants. If you put in an order to sell AAPL at $125, there is no way for them to get ahead of that order in the exchange.

I was in the industry (prop trading at BofA). I am no more ignorant than you. Here is a link to help you.

https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article...

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