HFT Trading Practices

who gets the priority in order fulfillment placed in that second? otherwise you have the same issue. the brokerage might also be tempted to make money by front running those trades since that have all the trades in front of them for a second before needing to be fulfilled

What's wrong with selling your orders to a market maker? You get a better price.

No. If the discrete exchange makes it possible to withdraw an offer in between ticks, then the HFT guys would do that every tick - so you actually wouldn't get a price (or you'd get a very wide spread), and it would basically fail to be an exchange. So let's assume any order you have on the book stays there until the next tick's auction. In that case the HFTers are going to give a much higher spread, because if new information comes in at 3.2s and the stock is suddenly worth more than it was at

It’s not so much price manipulation as timed restrictions / throttled deposits / withdrawals / order execution. basically market malfunctions / barriers. you can always arrange over the counter transactions though.

That's not what's happening here. Traders are arbitraging and reacting to public trades and orders on multiple markets.If you walk through a physical market where 8 apple carts are lined up, all selling apples for $1, buy every apple at cart #1, then buy every apple at cart #2, and so on, would you be surprised to find the price moving up or sellers stepping away as you approached carts #7 and #8?The same thing happens when trading. Securities trade on multiple markets and multip

If a market did as you suggested, then there would simply be no orders for 0.99999 seconds and then a huge flood of orders at 0.000001 seconds before execution happens.

Interesting. Thanks for the detailed response. I guess I can always naively assert that traders would figure out how to manage that bit of risk (that more of their trades would execute than they really wanted) but your explanation makes sense. Fastest order wins and, yes, that is arbitrary. Imperfect, but it keeps the market relatively efficient.

It seems like the problem is executing a trade when the first buyer (or seller) comes along to take the other side of the trade, rather than waiting a bit to see if someone else will give you an even better price. That is, trades shouldn't execute immediately when prices cross. Instead it should start an auction.If you're more interested in getting out a few milliseconds sooner than in getting a better price then the front-runner is doing you a service. Otherwise, it seems like the

You are misunderstanding what he's saying.He's saying that you could use a periodic-submission order system. Say that the period is (for ease of discussion), 1 hour, ending on the hour. All orders made during the hour are queued up and simultaneously executed at the start of the next hour. If there are too few bids/offers to satisfy all trades, then trades are satisfied using some fixed rubric (i.e., pro rata, max/min price buyer/seller will accept, etc.) Until ex

Hmm... it's almost as if brokers break up large orders into smaller orders for exactly this reason.