think of all those 100shr lot orders that HFTs flip, they flip them like this because those folks with a few hundred thousand or millions of shares to buy or sell have realized that their size alone in the market is enough to reduce their overall order price execution once it hits the market and becomes open for all to see their intent. these 100 share lots that seem to go on forever are the tips of these hidden 'iceberg' orders hitting the market, themselves split up and bid/ask all day/week/month by their own buy/sell order splitting algos, to receive the optimal price overall for their position. why give the HFT algos, or anyone, the chance to front run your order or see your book anymore than they already can sniff out. there are huge books, pools of liquidity, and large orders within them, which are only seen by the market as these 100shr 'pieces' that are allowed to be floated upon the markets waters, for it's fish of all sizes to digest. ever heard of the VWAP every once in a while? that is what all the crashing of these buyside/sellside algo orders hitting the wild waters of the hft/MM ocean measure their worth against, the water line. basically, can they get their large order out and executed in the market, without screwing themselves over by it. they can, by using these hidden orders, dark pools, and their HFT/MM algos making (confusing) the market for them.
Never heard of vwap but this all makes complete sense...dynamic hedging by taleb goes into.it a bit... only place I've read about it ... its that feeling of going in easy and getting killed on the way out