If that's true, you should be able to cite a statute, an SEC/FINRA/CFTC rule, a court ruling, or an exchange rule to explain how (allowed and prohibited behavior on markets being defined by all four of those kinds of sources, frustratingly enough).

I suspect you won't be able to find any such source. Malfeasance by trading firms makes career cases for prosecutors.

That's not to say, normatively, that that's how things should be: obviously, prosecutors are not making much of a dent in the trustworthiness of big financial firms.

No. It's not.

Once orders hit the market it's public information and you can do whatever you want with it. If you can do it faster than anyone else then go you!