I was thinking the same thing when reading the man’s reflection focused so much on his personal accolades and so little on what David Brooks calls “eulogy values.” But to each their own.

See my comment as well. The evidence PG uses to support his claim the New York Times has done this massive ideological shift is completely undone in his ninth footnote, that says the throw-away line in the article might not have even been reviewed by a senior editor. Yet PG still has gall to state it as fact.

Making such an absurd claim brings into question everything written on a subject he clearly knows nothing about.

- Order Flow Sales: This involves brokers selling information about their customers’ orders to interested parties.

- Potential for Front-Running: While not inherently front-running, selling order flow can enable it if the buyers use this information to trade ahead of customer orders.

- Payment for Order Flow: This practice allows some brokers to offer commission-free trades, as they make money by routing orders to specific market makers.

Front-runners do take on some risk, but it’s typically minimal:

- Speed: Modern front-running often occurs using high-frequency trading algorithms, minimizing the time between the front-runner’s trade and the large order execution.

- Committed Orders: Front-runners act on knowledge of committed orders, not mere possibilities. They have an informational advantage.

## The Fruit Stand Scenario

Imagine you're at a large farmer's market with numerous fruit stands. You're looking to buy a crate of apples, and you ask a friendly fruit stand owner, Citadel, for the price.

*The Setup:* - You want to buy a crate of apples - Citadel’s stand is selling apples for $50 per crate - There's another stand nearby selling for $48, but it's not immediately visible

*The Front-Running Process:*

1. *Information Advantage:* Citadel, being a regular at the market, knows about the nearby stand selling apples for $48.

2. *Customer's Intent:* When you ask Citadel for the price, they realizes you're likely to buy a crate.

3. *Quick Action:* Before quoting you a price, Citadel quickly sends his assistant to buy a crate from the $48 stand.

4. *Price Quote:* Citadel then tells you his price is $50 per crate, which you accept.

5. *Fulfillment:* Citadel’s assistant returns with the $48 crate, which Citadel then sells to you for $50.

6. *Profit:* Citadel pockets the $2 difference as profit, without ever risking his own inventory.

## The Market Making Parallel

In the financial markets, this process happens at lightning speed:

1. Market makers see incoming orders before they're fully processed.

2. They quickly buy or sell ahead of large orders on other exchanges.

3. They then fulfill the original order at a slightly worse price.

4. The profit comes from the price difference between exchanges.

This practice, while controversial, is often justified by market makers as providing liquidity and tighter spreads. However, it can be seen as unfair to traders who may not get the best possible price for their orders.

For many, the narrative has superseded reality. And that’s the crux of the issue. If only more people had your level of willingness to explore the facts on the ground with their own eyes. Thank you so much for sharing your perspective.

Comments URL: https://news.ycombinator.com/item?id=30224228

Points: 2

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