What about companies that find out about your retail trade before it's even executed, and are able to act on that information to profit from your very intent to trade?
Retail orders are small and generally aren't capable of moving prices. Your order for 100 shares of whatever isn't going to move the price so you can't really make money ahead of it.
Front-running is very common in bond trading.
They are market-making, which is something else entirely than front-running.
It's often claimed that HFT help make markets more liquid and efficient, "which helps everyone".
It's much less than clear whether the presence of HFT helps make an entire market more efficient, or whether just the HFTs are able to benefit.
Are you sure it's illegal if it's a hedge fund with access to order flow from a third party?
"Front running is one of the easiest ways to make money. It's essentially insider trading, except the inside information isn't about corporate activity; the information is about client order flow. In this case, since the index investors are not their clients, it is legal for hedge funds and any independent traders to front run them. One could argue that the hedge fund managers are doing nothing wrong; it's the investors' fault for acting irresponsibly. The problem with that argument is that many of these investors don't have a clue about what is happening to them." [0]
http://www.dark-bid.com/hedge-funds-front-running-investors....
Now about the Russel indexes - the article has a point there. They are notoriously shitty indexes. Nobody should be putting money into those. But still - nothing illegal(nor should it be). This is yes, clearly a case of "investors' fault for acting irresponsibly". Nobody is forcing them to use these indexes and this information isn't hidden anywhere. Last thing we need is 100 more regulations.
HF traders provide liquidity and market-making when it suits them. Doesn't that stop when it doesn't?
edit: found the article quoted last time I discussed this.
https://blogs.cfainstitute.org/investor/2013/04/24/what-to-d...
Larry Harris, Professor of Finance as USC;LA says
"A few high-frequency traders front-run buy-side traders who are working orders, thereby making the latter’s trades more expensive. Such activities are legal if the high-frequency traders do not improperly obtain information about the orders they front-run."
It's only profitable if you dont get caught. SEC will make a very expensive and public example if they catch you.
Source: +15 years in the industry, a number of which have been spent working in/with compliance.
Firms don't buy order flow from Robinhood in order to trade in front of those orders, they buy order flow from Robinhood to execute those orders for those customers which is a service that those customers pay for as purchasers of liquidity.