[derriz]

I also worked in HFT and have no idea what you mean when you say other HFT shops can front-run your orders?

To front run someone’s order you need to have advance information of their order s? Normally this means the front runner is operating as a broker. I can’t imagine any HFTs using other HFTs as brokers to forward their orders to the exchange?

[webel0]

If someone starts running this model couldn’t you just run the model yourself to predict the order?

I’m sure that there is market microstructure stuff/front running practicalities that would make this harder than it sounds but still you wouldn’t completely be in the dark.

[derriz]

But how would doing that constitute front running?

Front running has a specific definition in terms of market regulation (see my other comment) and what you describe is not front-running.

[Traster]

The distinction is between algorithmic traders - and HFT. HFT traders often find ways of making money from algorithmic traders. Especially if the algorthmic traders are doing things like VWAP.

[derriz]

I don't understand your point or how it explains how HFT companies can "front-run" other HFT companies?

Front-running is when someone with a fiduciary duty - typically a broker or dealer - takes an order from a client and then trades on their own book BEFORE executing the client's order knowing the effect of the clients order on the market and knowing that they can exploit this effect for their own benefit.

I know of no HFTs which have such a relationship with rival HFTs and can't even imagine such a relationship existing never mind it being a frequent cause of why strategies perform poorly for HFTs.

Front-running hasn't been a feature of markets for decades at least. Any sniff of front-running would have the SEC or CFTC fine your company into oblivion and possibly result in jail time or at the very least lifetime bans from the financial industry.

[Traster]

Ok, well let's say you're using an algorithm to trade, and an HFT firm identifies what your 'algorithm' is doing, they're going to front run you - whether that be using VWAP or flashing 10 lots every 30 seconds. And both of those absolutlely happen. They're not going to literally 'know' what you're going to do, but some algos are pretty obvious and somewhat exploitable.

[derriz]

That's not front running. You can only front run and order if you're handling the order for a third party.

Being faster than someone else isn't "front running" them nor is spotting patterns in other participant's behaviour and exploiting those patterns. The definition of "front running" is reasonably specific: https://en.wikipedia.org/wiki/Front_running