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by kasey_junk
4398 days ago
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Except that's not how the latency arbitrage trade actually works. What is actually happening is that the HFT is offering shares on all the exchanges on both sides of the bid/ask spread at the same time. When they get filled on an order at a price on 1 exchange it is used as one of many signals to indicate if their pricing is accurate. If their algorithm thinks that fill indicates a price movement (for instance if the entire level was removed) then they will update their prices on all the other exchanges accordingly. If the algorithm doesn't believe this indicates a long term price movement they won't (or they may even re-up at the same price on the exchange they got filled on). No one is going out and buying ahead of someone else because that is too expensive (you have to pay the bid/ask spread to do it) and too risky (you might be wrong about your price determination). Finally, just a detail, you can typically opt out of NBBO matching if you want. |
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