That's the theory. In practice we know that's not necessarily true. e.g. stop-loss order and the stock gaps down. Did the stop-loss order execute? No, it may have executed as a market order.

And that's the point he was trying to make. He's saying that the broker can create any suitable excuse to fit the situation.

With HFT it may not even be an excuse and could very well reflect the reality of the situation i.e. the price has moved too quickly for the exchange to keep up.

If the claim is that a sell at 582 executed and a buy at 583 did not execute, I want to see evidence. I see variations on this claim with a frequency approaching high, always by a random internet commenter "betting" on some hypothetical.

the price has moved too quickly for the exchange to keep up. What does that even mean?

Edit: added link to show that orders don't necessarily get filled according to time priority ("an order clearly arrived later than ours with the same limit price, yet it was filled and we were not.")

It's only hypothetical until it happens to you.

Refer to the fleitz's comment about short squeeze. That's an example of orders that don't get filled.

In theory the broker is supposed to borrow shares to allow the trader to sell them short. What happens if the broker flouts securities law and does not follow the rules?

http://www.nytimes.com/2012/03/26/business/goldman-sachs-den...

BTW, non-HFT'ers get consolidated market feeds which have higher latency than raw feeds that HFT'ers use. That's what a major part of the HFT debate is about.

http://www.hftreview.com/pg/blog/mike/read/5317/hft-and-late...

http://www.tradeworx.com/TWX-SEC-2010.pdf [PDF] (refer to page 17, 18)

Thank you for the TWX pdf, but is now a good time to point out that the entire paper was dedicated to proving that HFT is a good thing? Their solution to the order priority is also removing artificial regulations, not adding more. I feel like I should have been the one to post that link.

The paper presents the case that HFT as it is practiced right now is bad due to regulations.

But we do not know if tweaking the regulations is the "right" move. Could be a case of "out of the frying pan and into the fire".