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by yumraj
2445 days ago
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>> Front-running, for the record, is illegal
I didn't get the sense that it is illegal from the book. Could you please elaborate what you understand by front running and why/how is it illegal. >> Michael Lewis perverts the phrase to mean "using publicly available information Per my understanding Michael Lewis is referring to the fact that HFT firms were able to race faster than the original trade executions and execute part of the trade, due to it being spread over multiple exchanges with different latencies. While this may not be illegal, it surely sounds unethical. |
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Front running involves placing a trade based on nonpublic information. It's a type of insider trading that has been going on for at least hundreds of years and it has nothing to do with HFT. The classic example is a broker placing orders ahead of their own clients in order to profit off the market's reaction to the client orders.
An HFT system placing orders based on public data feeds is not front running.