[hft_throwaway]

I think it is more short-term day traders taking money from naive HFTs. I'm sure some people automate this type of manipulation, but I seriously doubt that any of the "big name" market making firms do it. They are under a lot of regulatory scrutiny, make more than enough through legitimate trading, and have the technology & data to enable their internal compliance auditors to detect it.

I also don't think it can make that much. It may work for a little while, but no algo is going to sit there bleeding money to you forever without hitting a risk limit or being reviewed/adjusted. If your business model depends on somebody else doing something dumb, it's not going to work for the long-haul.

[lrm242]

The cases I know of where the SEC has cracked down were all manual traders leaning the book and essentially taking advantage of naive MM algos. Proceeds < $5mm each time I believe.