I couldn't agree more. the hatred is spreading like wild fire. there are ways to find out about this type of trading, yet the average trader is too lazy or uninformed to actually sit down and learn how to do this on their own so they complain when their method loses money!
Yes, the average MOOK is a lazy bastard that has a streak of luck being on the right side and then blows up since he has no clue. Ya' gotta love the real liquidity providers.
The HF bunch aren't shy when it comes to front-running. Now you're gonna pretend you don't front-run order flow when given a legal opportunity to do so? You expect anyone to believe that? Trying to fool us again, huh? Tradeworx says it right there, in black-and-white: In the mean time, any HFT with direct feeds to both exchanges will notice that the offer is gone, but is still displayed on UQDF. Many such HFTs will rush to form the new $20.00 bid, and will circumvent the Order Protection Rule by sending ISO orders. http://sec.gov/comments/s7-02-10/s70210-129.pdf And btw, Tradeworx didn't say "the majority" of HFT's inadvertently use ISO orders. They said "many". Another lie. Admittedly, you steal for a living then downplay ISO orders as something you only exploit *some* of the time. Oh, gee. No big deal, then. I guess we should be thankful?!
I think you are missing the main point they are trying to make. This is possible because of REG-NMS that was introduced by regulators couple of years ago to protect retail investors. In this example HFT is not acting on non public information at all, they see that the spread is wide and they tight it. For you it may seems like front running, but this is the ill-effect of stupid regulations.
i'm not lying or trying to fool anyone. i along with MANY hft firms don't knowingly front-run anything. you're still confused. iso's aren't being used inadvertently. they're specifically and knowingly used because they're the most efficient order type for making markets on a particular exchange. if i want fills on arca, i don't want arca to route my order to nasdaq or any other x number of exchanges because that takes time and my profitability is linked to my positioin in queue. the iso order ensures the fastest entry into the marketplace for that particular exchange. however, what IS inadvertent is the 'front-running' of orders. how? most firms don't bother with uqdf/cqs/cts/siac feeds for two reasons, 1) those feeds only disseminate top level quotes, and 2) they're slow. instead, firms pull the full book direct from each exchange. the inadvertent front-running happens when they're making a market and the bid they were making a market against disappears, so they all rush to offer at the old bid price trying to be first in queue. if the bid disappearing was the result of an order that was set to route out and is still being processed by the sip (uqdf in the tradeworx example), then the first market maker to that new quote is going to get that fill. are they going to know they were front-running? nope. is that fair? no, it's not fair, which is the point of the tradeworx letter. they're aim though was not to demonize hft with uniformed hyperbole, like you're doing, but to point out with clear facts the actual issue: a flaw in the regnms implentation of which this is a by-product. correct the flawed regulation and you'll get the results you want. still waiting for your responses to those questions i posed in reply to your example order in critique of dark pools...
when YOU send the order YOU are "flashing" it to the darkpool (assuming it accepts IOI's). the darkpool doesn't "flash" anything. it's a choice YOU MADE. when YOU route DARK, YOU are "flashing" an Indicator Of Interest (IOI) to any market makers in that pool. YOU are KNOWINGLY showing your hand in the hopes someone may want your liquidity and potentially PRICE IMPROVE you before your order hits the public market. YOU accept responsibility that that information can be used AGAINST YOU. YOU routed there, and YOU ARE AWARE of those risks, and YOU have COST MODELED the route and YOU HAVE PROVEN it reduces YOUR COSTS. if you have not done these things and you have no awareness of YOUR tools, you should not hold other people responsible. it is YOUR CHOICE to use them. DO NOT use tools YOU DO NOT understand.