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0 pointsfractionalhare5y ago0 comments

What you're talking about is not frontrunning, it's purchasing order flow for market making. Frontrunning is an illegal activity with a specific definition. Purchasing order flow is not illegal.

While we're at it, quant firms occupy a family of trading strategies which are a superset of HFT; not all quants are market making, trading intraday or pursuing low latency strategies.

With all due respect, please stop perpetuating popular finance misconceptions of the Flash Boys variety. If this is something you'd like to learn more about, I suggest you read the following:

- https://blog.headlandstech.com/2017/08/03/quantitative-tradi...

- Flash Boys: Not So Fast

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jevgeni5y ago

So what if one of those non-market making firms buys order flow?

fractionalhareOP5y ago

That's not really a thing, but even if it was, it would still not be frontrunning. Order flow is purchased for the specific purpose of making a market with the wider bid-ask spread acceptable to retail investors. They tend to place market orders and don't particularly care if their trade is off by a cent or two.

You can quibble with the academic arguments on whether or not this facilitates liquidity and price discovery (and therefore helps retail investors). Or you can just place a limit order and move on. Either way, nothing illegal or nefarious is happening. Just because they're purchasing order flow and executing your trade doesn't mean the national best bid and offer (NBBO) is being violated.

jevgeni5y ago

And capital requirements are done with the specific purpose of maintaining capital strength of banks. Didn’t really stop Lehmann from doing “balance sheet optimization” intra-month.

Just like if market makers say the only thing they do is flow, doesn’t really mean it’s the only thing they do.

j / k navigate · click thread line to collapse

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jevgeni5y ago

So what if one of those non-market making firms buys order flow?

fractionalhareOP5y ago

jevgeni5y ago

And capital requirements are done with the specific purpose of maintaining capital strength of banks. Didn’t really stop Lehmann from doing “balance sheet optimization” intra-month.

Just like if market makers say the only thing they do is flow, doesn’t really mean it’s the only thing they do.

j / k navigate · click thread line to collapse