Put server in basement of exchange, front run any trades before they actually happen between the party holding the equity and the one who will leave with it for the night. How is that not parasitic?
Running algo trading would get me fired so fast. (I work at a mutual fund company, though not just yet on anything trading related)
The exchange colos are not in the same space as the physical trading floor. E.g. for U.S. equities, the NYSE trading floor is in NYC, but the machinery for all the major exchanges (barring CHX, I believe) is in northern New Jersey.
"front run any trades before they actually happen between the party holding the equity and the one who will leave with it for the night."
Front running is illegal, and as a prop trader it's not physically possible. In order to front run an order, you have to be in the path between the order originator and the exchange.
My impression (especially given his whole section on frequency of trading) was that this was NOT about HFT (which you seem to be describing), but rather a way to choose what to buy/sell and when.
It's a bit unclear: is it just about automated market research, or automating the transactions as well. The latter starts to wander into a gray area of trying to not get beaten up by HFT thugs for investments you plan to hold, or being an HFT thug oneself for investments you have not intent to hold or to run a naked short.
How is HFT materially different than actual front running by a broker? You might not have individual orders from your own customers in front of you, but clearly your only interest in an equity is to find activity and sponge off a few cents by holding shares for a fraction of a second.
HFT is just a legal way to pull almost the same scam.
