Quant fund are not involved in latency arbitrage. HFT is a completely different space, and most HFT firms are prop shops, not funds.

Most quant strategies aren't really dependent on insanely fast execution. They may hold a position for weeks or months at a time.

Most if not all the highly successful and most secretive quant funds execute hundreds of thousands trades per day...while not considered to be "HFT"...the idea of trading hundreds or thousands positions per second is quite a high frequency.

Most quant shops are not turning over thousands of positions everyday, the trading costs alone would be ridiculous.

But regardless, HFT usually means latency arb, not just trading a lot. There's a misperception that quant funds are making money on slight mispricings, but while I can't speak for all funds of course, this isn't generally true. Quant funds are much closer to buy and hold long term investors than they are to HFT firms.

This is algo trading, or execution optimization.

They aren't measuring the market / order book and then reacting at high frequency. They are reacting at low frequency and then the execution is optimized to minimize losses caused by market feedback.

This is a very important distinction if you hold the view that HFT risks destabilizing markets.

Order flow has been sold for much longer than the more recent commission-free trading trend, which was primarily driven by Robinhood. Robinhood just decided they'd sell order flow without also taking commission.

More to the point: the primary consumer of order flow is market making HFTs, which DE Shaw is not. Stat arb/quant trading firms don't rely on market making rebates for trading profits.

The suggestion above is that GP simply doesn't believe stat arb is a thing. Which I know to be untrue, or the level of cover up is quite impressive

This isn’t true for every firm, but a lot of them do it.

I think it’s bad (it’s weird/unfair), but on the other hand I am happy not paying commission/getting orders filled at prices often a bit better than advertised on my broker’s app, so maybe it’s ok? Idk.

I’d argue it’s not bad at all. It very cleanly aligns incentives in a way that benefits both sides.

Another way to look at it is that there’s an “implied commission”, paid in the form of a perhaps slightly inflated purchase price, that largely doesn’t affect retail investors. And this all works out for quant firms because they make money off this at volume, at near zero marginal cost.

In fact, it’s odd that commission free trading didn’t happen a lot sooner. Etrade, Schwab, etc were rent seekers.

> I think it’s bad (it’s weird/unfair)

How is it bad or unfair? Everybody wins: you get a better price, the market maker does a trade they're happy with, and your broker gets a little bit of money.

I think it’s a little unfair compared to letting people put their orders on exchanges directly

You are guaranteed a price that is equal or better than what you'd get on the exchange. Why would you want to bypass that?

Well “the price” might be totally different if there were no off-exchange orders. But I’m sort of being a devil’s advocate... I agree with your argument in practice since I don’t expect to see such open exchanges anytime soon

> Well “the price” might be totally different if there were no off-exchange orders.

I'm not sure what that means, but there's no scenario in which you'd get a worse price. That would be illegal under the Reg NMS order protection rule.

https://www.investopedia.com/terms/o/order-protection-rule.a...

You won’t get a worse price than what the exchange says is the price, but that price Is a moving target; if all competitors could see all orders, the price would move. Idk if it makes a difference on average but it is a difference