Re:For the Love of Money
by yummyfajitas on Monday January 20, 2014 @07:45AM
(#7089190)
Front running is when a broker trades in front of his client. The broker has a fiduciary duty to act in his client's best interests. If I trade ahead of you because I can guess your actions, that's just me kicking your ass.
Incidentally, if it's acceptable for Charlie Munger to sell in such a way that others will suffer the price impact of his trade, why is it not acceptable for HFTs to do the same thing? In both cases, it's just one trader playing short term games against other traders in order to make money.
brokers often do not fulfill their fiduciary responsibility.
It's not uncommon at all and I've seen it happen quite openly in many situations. It's tricky business outside of the pure electronic game.
If we're talking about limit orders than HFTs have no effect at all and might as well not exist. I'm talking about market orders.
Also what does it even mean to "Move the price of a stock to your advantage" ?
The sellers sell at their ask price (or at my bid), it's their decision to sell. If you offer to sell something to me at $10, I haven't "screwed" you just because someone else was willing to pay $11.
It absolutely is front running. Moving the price of a stock to your advantage because you know my intentions is exactly what front running is.