Suddenly, the popularity and profitability of HFT starts making a lot more sense.
If you think that the profitability (what little there is left) of HFT is due to maliciously manipulating the time of customer order submissions than your understanding of how this system works is flawed.
I believe HFT is often used to front-run other trades. I don't think I'm crazy believing this, I would love to read something to convince me that this belief is wrong.
It's a pretty simple concept. Net orderflow moves the price in the direction of the flow. Having foreknowledge of net flows implies knowledge of future price changes. Front-running is just trading on that knowledge.
Here are some ways it happens:
1. A broker-dealer has client orders in its possession and trades ahead of them (classic front running)
2. A hedge fund with 2 portfolios trading correlated signals, one faster than the other (the Medallion-RIEF hypothesis)
3. Anticipate retails flows using behavioral advertising data or network intercepts from a statistically meaningful population (the Robintrack model)
There are more, but they all share the same flavour. I wonder if Robinhood is sending retail orders to anyone running strategy 3.
If you think that the profitability (what little there is left) of HFT is due to maliciously manipulating the time of customer order submissions than your understanding of how this system works is flawed.