[001sky]

You're missing the point that front running is capital efficient and ~zero risk. There is no discussion of hedging strategy and cost, etc in your reply. It seems plausible that (unobserved) front-running profits could easily subsidize (observed) low-spreads as loss leaders.

[harryh]

What front running? Are you talking about arbitrage between exchanges or something else?

[001sky]

Anything that starts after "buy/sell" electrons are entered into a book [#] and includes a pricing mark change before "fill" hit my account. This set of trades is broader than what you might imaging, but specifically I'm interested in any trade that (1) has information incorporation; and (2) dependent logic based on (1) and (3) requires sequential execution (ie, fronting). It is not enough to say these trades are not observed. They have to be shown to be impossible (or unprofitable). There is reasonable evidence that they are both possible and profitable in Lewis's book.

# This includes both voluntary and involuntary disclosure.

[harryh]

OK, well I haven't read the book (only the NYT excerpt so far) but I am highly skeptical that such trades are happening. I will read the book though, and reserve judgement until then.