I suspect "front running" is possible only because the exchanges allow HFTs to cut to the front of the queue (eg. pro-rata rather than FIFO). I've often experienced this myself with limit orders. I would enter a limit order well in advance, often as much as 30 minutes ahead. If HFTs think a nano-second makes all the difference in their trading, then wouldn't you say 30 minutes are like an eternity? So it would be reasonable to say, if and when the price is hit, I should be the first in line to get filled. But I find my orders get filled more closer to the back of the line, usually just before the price is lifted. How do you explain that?
"Retail investors are harmed because they have an increasingly smaller chance to be at a reasonable spot in the order queue at any given limit price. HFT firms are geared to beat everybody at that game; the rebate arbitrage form of HFT by itself has diminished the effectiveness of an investor limit order and has thus dis-incentivized investors from placing them. What is the point of entering a static limit order in any stock when your chances of having it executed in a reasonably timely fashion are diminished, and your order just creates a target for various kinds of HFT?" From Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio
That's why I use MIT orders a lot these days, otherwise I would place a limit order 1 tick lower. Still, these 1-tick spread can add up a lot over time.
That was not my point. I simply corrected you, hedge funds have a lot of order flow information and at times front run client orders (illegally). Some operate vast dark pools and manage extremely large orders. Some hedge funds lost law suits because of that. Equally, banks have lots of client flow information and any bank that claims to not engage in front running within any given week of the year is an outright liar.
Wow, I now understand why my chart looked so different depending on the data vendor. Who knew the exchanges offered "public" and "private" data feeds. Brad Katsuyama alleges there are "hundred versions of stock market".
If we play tennis and I tell you I am going to buy a shitload of shares of XYZ and you run home and buy XYC ahead of me, it is not Sub-pennying until the market moves and hits your limit.
No, that is not the reason. All (most) vendors use official feed. Also, every market behaves differently, so should not mix up issues. Pro-rata is not in US equities. Well, add to that asymmetric speed bumps - thanks Brad! Now pros (MMs) can pull their orders before HFTs can sweep them, but you and I can't! So you are unlikely to fill in good situation but very likely to fill in bad - aka adverse selection. I think it's best for retail trader to understand that they can't bring a knife to a gun fight. Just accept it and concentrate on strategies which are not speed dependant. Just reality.