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by x87678r 1997 days ago
> "I want this stock right now, you can decide what the price is"

No this is too pessimistic, there are best execution rules which say the broker must get the best price possible. It can trade off exchange with a hedge fund, in a dark pool or internally with another customer, but the price must be better than that of the exchange bid/ask.
1 comments
drcode 1997 days ago
It seems obvious to me that these rules can be skirted by just time-compressing the process, since it's hard to prove whether an order was placed at, let's say, noon+5msec versus noon+15msec.

Suddenly, the popularity and profitability of HFT starts making a lot more sense.

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harryh 1997 days ago
Suddenly, the popularity and profitability of HFT starts making a lot more sense.

If you think that the profitability (what little there is left) of HFT is due to maliciously manipulating the time of customer order submissions than your understanding of how this system works is flawed.

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drcode 1997 days ago
I believe HFT is often used to front-run other trades. I don't think I'm crazy believing this, I would love to read something to convince me that this belief is wrong.
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tptacek 1996 days ago
Why don't you start by telling us what you have read, about HFT and about the concept of front-running.
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rmrfstar 1996 days ago
It's a pretty simple concept. Net orderflow moves the price in the direction of the flow. Having foreknowledge of net flows implies knowledge of future price changes. Front-running is just trading on that knowledge.

Here are some ways it happens:

1. A broker-dealer has client orders in its possession and trades ahead of them (classic front running)

2. A hedge fund with 2 portfolios trading correlated signals, one faster than the other (the Medallion-RIEF hypothesis)

3. Anticipate retails flows using behavioral advertising data or network intercepts from a statistically meaningful population (the Robintrack model)

There are more, but they all share the same flavour. I wonder if Robinhood is sending retail orders to anyone running strategy 3.

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tptacek 1996 days ago
Wow.
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smabie 1997 days ago
No, this isn't how it works
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TedDoesntTalk 1997 days ago
nit: trades on many exchanges are measured from noon + nanoseconds, not millis
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