Hacker News Reader

Comment by CyberDildonics | Hacker News Reader

Nothing in this comment contradicts or disproves that front running can and is happening. Flash Boys described a large order going to an exchange and HFT firms seeing that, buying stocks on other exchanges before the real purchaser, and selling them back to the real purchaser after the first exchange they get to can't fill their large order. HFT firms know there will be buy orders at the other exchanges and they run out in front of those buy orders to become a middle man. That is the very definition of front running and it was obviously happening. Do you have information that directly contradicts this?

View on HN

An HFT firm doing that would get fooled by activity on one exchange which resembled part of a large order being filled, but didn't actually propagate to other exchanges. These firms are doing a sort of high-frequency gamble, whereas a broker acts on certain information to which only they are privy before its execution.

There is a huge gulf between "there exists bad behavior that can fairly be called HFT" and "all HFT is bad behavior." Even if we agree that the behavior you describe is bad (it's not "front running" - that has a particular other definition), much HFT does not resemble that.

First, that's not the definition of front running, and second, the expectation that a large order can trade atomically has never been valid, and, if you consider the computer science behind it, can't be valid.

If that isn't front running, then what is? And if you wouldn't call that front running, what would you call it? You haven't offered anything to back up any of what you've said.

All I'm saying is that sub-millisecond HFT is only useful to the people doing it and no one else. People defending HFT as being necessary and helpful is ridiculous. Even an exchange where orders go in over the course of a second, are matched up within the exchange, then traded, would not offer latency to a person, but would offer everyone a chance to sync with the exchange cycle and submit their orders with enough time to be matched. If all the exchanges someone was trying to use worked this way it would offer no disadvantage to a human trader, but would make the HFT arbitrage much less lucrative.

Like I said upthread: front-running happens when a broker takes an order for a client and, before submitting it to the market, trades against that order. Front-running is an agency problem.

Reply on news.ycombinator.com