Since frontrunning is again being talked about by technologists, would like to explain the classical version of it, which is almost the opposite of the way that most technologists think it works:
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Coinbase did this for years (not sure if they still do).
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Can you share any more here?
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In general I like your rebuttals of wrong-headed HFT criticism, but I haven't seen you address the right-headed criticisms yet. Here's one about why HFT does involve front running, by the highly clueful Wellman & Wah: https://strategicreasoning.org/arguments-about-front-running/ …
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The problem there isn’t HFT but the exchanges. If a latency arbitrage exists, it’s a public service to take it (the same thing should have the same price across different venues). If latency arbitrages are bad, exchanges should prevent them from existing somehow.
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I understand "front-running" as buying (selling) on their own account before buying (selling) on the client's account, on the expectation that the client's purchases (sales) could move the market and thus they could close the position at a profit.
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Isn't that what was just described?
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What if there was randomized latency for everyone? A sufficient but ‘unpredictable’ level of variability could close out any realistic window of opportunity, maybe.
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the solution described in the Michael Lewis book Flash Boys was the one used by IEX, rather than sending out orders to various exchanges that can front run a trade or sell colocation services, use a long coiled wire to force a delay on all orders.
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