I work in the industry too and the things that people mislabel as "front running" is really aggravating. At worst, you could call it "order anticipating": using publicly available knowledge to figure out that if someone hit Exchange A and B, they're probably headed to Exchange C next. But they have no inside knowledge that the same party will in fact send an order to Exchange C next. They're taking a risk by anticipating that.
"Front running" as defined by the SEC has a more narrow definition. It basically means that you have a customer that has placed an order for XYZ and you aware of the order, but you placed your own order to be executed in front them, thus forcing them to buy it from you at a higher price than if their order was executed first. HFTs are not "front running" anybody.
Great point, and you understand the American stock market better than most Americans. This article was true about 20 years ago, but the author is completely wrong when he says this:
"A single market to trade. All stocks for Microsoft (MSFT), are traded on the NASDAQ exchange. All stocks for Ford (F) are on the NYSE."
MSFT and F both traded on 16 difference stock exchanges, not to mention countless "dark pools", each with their own book of bids and offers. But there's a national best bid-offer (NBBO) that all exchanges must respect, so it can behave like a single market. That's what Reg-NMS is about. The benefits of having several exchanges competing each other, while trying to retain the benefits of single market. This is also where HFT enters the picture with latency arbitrage and other trading strategies when prices on those markets get out of sync.
20 years ago, you could say that MSFT only trades on NASDAQ, but that hasn't been true since Reg NMS came into effect in 2005. Each stock has a primary listing market that controls things like halts and opening/closing auctions, but the stock can be traded on any exchange, each with its own dynamics.
Right. I love to listen to music while coding, but I couldn't listen to a podcast. I've tried, but I can't write words and listen to words at the same time. But music is no problem.
Yes that is one way they make money but not the only way and not even the most effective way since they are splitting their profits with anyone that can compete with them and there is only so much to be made.
The fact that there are multiple issues with high frequency trading is one of the reasons it ends up being so polarizing. It ends up being an ambiguous term that sometimes means something that is a natural result of decentralization, and sometime means techniques that would be grating to most people's common sense of what should be legal.
I've seen this type of behavior described as "order anticipation", which I think is a much better term. "Front running" means that you are using confidential information that an order will be submitted. "Order anticipation" means that are you using public information and you are anticipating that an order will be submitted.
Does this remind anybody of the CueCat? Same story...subsidized hardware that hackers repurposed for other uses. I think the makers of CueCat tried to unsuccessfully sue the hackers:
Well CueCat was "free" (Although mostly forced on you). Amazon dash is a regular paid product on Amazon. Neither of them can hold you accountable for hacking/repurposing it. However, if someone has a chance that would be CueCat.
Wifi chips are cheap. So cheap, that I'd all but guarantee they're still making a profit on it, even at $5. You can get ESP8266 chips from people in china for about $2.50 each including shipping, and those will do everything these buttons do. Given Amazon's volume, they probably cost half that for them, so hacking them is pretty much free advertising.
What you should really admire is Amazon's shareholders' tolerance for failure. A lot more companies would be more likely to take big risks like Amazon if their shareholders would tolerate year after year of losses. Time will tell if they are stupid or admirable.
I'm reluctant to get involved in the politically incorrect side of this argument, but FWIW, that stat comes from "Intelligence: Knowns and Unknowns", which was a paper published in the mid-90s by the American Psychological Association (in response to the controversial book "The Bell Curve").
From the paper:
"The differential between the mean intelligence test scores of Blacks and Whites (about one standard deviation, although it may be diminishing) does not result from any obvious biases in test construction and administration, nor does it simply reflect differences in socio-economic status. Explanations based on factors of caste and culture may be appropriate, but so far have little direct empirical support. There is certainly no such support for a genetic interpretation. At present, no one knows what causes this differential."
They boasted that they signed up 1 million new Prime members in the 3rd week of December. I wonder how many of those people signed up for the free trial with the intention of cancelling before the end of the free month? I know that's exactly what I did last year when I still needed to buy a few more presents a couple of weeks before Christmas.
"Front running" as defined by the SEC has a more narrow definition. It basically means that you have a customer that has placed an order for XYZ and you aware of the order, but you placed your own order to be executed in front them, thus forcing them to buy it from you at a higher price than if their order was executed first. HFTs are not "front running" anybody.