[yummyfajitas]

When you tell a broker "trade on my behalf" and he trades first, that's front running because he is obligated to do what's best for you. Other market participants do not have the same duty.

To make an analogy: my boxing coach is obligated to give me good advice and he's a jerk if he doesn't. The other boxer is not being a jerk if he feints and then punches me in the face.

[fauigerzigerk]

And what if your broker routes your order through an HFT for a fee so the HFT can front-run you? That's what some say is happening. I'm still unclear if I can really believe that because it sounds so obviously illegal.

[yummyfajitas]

Retail brokers often have ELP programs where an HFT has the option to fill your order (and the obligation to do so a certain fraction of the time, typically 20-50%) and avoid paying routing fees.

There is little opportunity to front-run in this case since a) no one on ETrade moves large blocks b) ETrade wants to make sure the ELP program is full of benevolent market makers and c) fill rate requirements. You can always opt out of these programs (turn off "smart routing" or something similarly named), but most people don't since they typically reduce your costs.

[kasey_junk]

That's what I was hoping Flashboys was going to be about. I haven't finished the book yet but so far Lewis mentions it in passing but doesn't dig into it.