Originally posted by CoolTrader karabugla, did you work for as a futures broker or stock broker?
I agree with your second point, you can hardly figure out the secret of a sophiscated trading system by simply looking at the orders it generates.
But I am still a bit worried about front running. Is there any regulation in the futures industry to prevent that kind of activity?
i worked as a stockbroker. regulations for futures are the same imo. it is prohibited to frontrun in any way and the brokers are forced to have compliance officers that surveil the their brokers.
if i had traded intraday my account i would have gotten fired.
if i had been frontrunning a customers order i would have gotten fired.
this refers to stocks, futures and any other instrument traded at the company.
i am not 100 % sure about the exact regulations in us, but for brokers it is usually not allowed to daytrade (at least it was for me).
candletrader said it already: 'a sophisticated trader uses his technicals, gut feel and discipline'.
this makes it impossible to figure out trading systems imo.
candletrader - it is sure interesting to have a look at the records of the most successful clients :-). but i can tell u one thing - it can be very frustrating as well - if u see one guy consitently averaging 5k+ a day and u dont know how the heck he΄s doing it u get really pissed.....
Originally posted by Rigel If the guy was swing-trading and you entered an order 5 minutes after he did would it be considered front-running (in the legal sense)?
Time is not the only issue. If you place a buy limit at 1000, the piggybacker could enter a buy order later at 1003 before your order is triggered.
I am wondering how successful traders protect themselves from front running. I can only think of the following cases that you can be safe.
1. You own a brokerage firm.
2. You have an insider relationship with the firm, and know they will not copy your trades.
3. The traders of the firm are just as successful or trading in the same way as you are. They don't need to copy your trades.
[QUOTE]Originally posted by Rigel They wouldn't have to reverse-engineer. All they would have to do is copy your trades. The profit possibilities for a large broker with a huge customer list are mind boggling IMO. Can you imagine being able to scan a customer database, identify all the ones that have a long term record of at least 15 trades a month, a win/loss trade ratio of at least 85%, and a profit on capital of at least 8%/mo, etc.. It would be like having 100 extremely successful traders working for you for no cost.
Excellent point in this age of scanning with computers, not front-running, but piggybacking. Mind boggling to say the least to dip into that pool of talent, and impossible to believe it's not being done.
Originally posted by rcreal Brokers are in the business to service customers. Their bread-n-butter are commissions. Systems come and go, but commissions are a constant.
If you give your system to a broker to trade, just have a non-disclosure agreement signed prior to giving them the code. If you use tradestation, simply give them a token-only (protected els or eld) file coded to only work on their particular copy of tradestation (code to their customerID).
Yep. Brokers are so ignorant about trading and the markets that they will NEVER be able to figure out anything NOR do they even have the intentions/desires or the BALLS to risk anything. They just want to be the middle man and earning that stupid commission each time a customer trades.
So, don't even worry about these class of people. The very LAST set of people I would think that would be able to trade at all are brokers.