[rmrfstar]

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.

[tptacek]

Wow.