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Is High-Frequency Trading a Form of Front-Running?

On 60 Minutes, Michael Lewis accused high-frequency traders of front-running. Apparently it’s become necessary to remind critics of high-frequency trading of the definition of “front-running.”

Front-running  - n. “The practice by market makers of dealing on advance information provided by their brokers and investment analysts, before their clients have been given the information.”  -- Oxford English Dictionary

There is room for reasonable debate about the merits of HFT. And there is room for multiple exchanges catering to multiple types of investors.  But one thing critics should be wary of is distorting the terms of debate. Many, if not most, HFT firms are ”prop shops.” That is, they are proprietary traders, trading on behalf of their own accounts, not clients. There are no clients for these particular high-frequency traders to “front-run.”

Front-running is already illegal under current law. If firms that do take in outside capital are front-running, then they should be prosecuted. But indiscriminate use of that term detracts from the HFT debate.