The suspicious thing about financial conspiracy theories is they are all alike….
But it is worth distinguishing between the illegal and the irritating. Frontrunning — or trading ahead of customer orders — is the former. Successfully employing the biggest nerds and the best millisecond-saving technology is not. Markets have always been skewed against retail money, whether information sloshes around an open outcry pit or a high-tech algorithm. Now, however, cheaper technology, plus the disaggregation of traditional exchanges, means HFT is exploding.
Read the entire Lex note here.
Hey, at least the SEC is happy. They have another high-profile investigation to help rebuild their public image.
Related links:
The Cold War in high frequency trading turns hot - FT Alphaville
The real story of trading software espionage – Tabb Group, in The Long Room
The Cold War in high frequency trading – FT Alphaville