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Retail stop orders being leaked to HFT internalizer firms

  #11 (permalink)

Market Wizard
Berlin, Europe
Trading Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker/Data: Interactive Brokers
Favorite Futures: Keyboard
Fat Tails's Avatar
Posts: 9,794 since Mar 2010
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The whole discussion here should not be about stops or leaks.

The underlying problem is the fragmentation of the US stock markets which is divided between innumerable exchanges and dark pools. Some HFT firms have made significant investments into technical equipment which allows them to get faster access to information than most of the other (non HFT) participants.

The HFT firms are effectively doing something that has always been a problem of the markets. They are front-running client orders and get a free lunch. This is called latency arbitrage. What a modern word for front-running! But it is still the same old wolf disguised as a modern sheep.

Latency arbitrage - or technology driven front running - is a criminal activity and should possibly be banned.

Futures trading is less affected, as the futures markets are centralized and not fragemented.

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