TA discussion, page-4199

The Kohler article link posted by Pixie2000 explains the “front-run” advantage that HFT computers have. If they detect a buy order that would hit their blocking sell order, the sell order can be pulled before the buy order hits the ASX.

"What do the computers and their algorithms do? Well, as my relatively low-frequency brain can understand it, these machines constantly monitor order flow into the ASX servers, and the sophisticated programs can pick up patterns that indicate when a reasonably large order has been placed. What they then do, in effect, is "front-run" – that is, they buy ahead of the order and make a small spread selling into it.

In other words, by operating at the speed of light they can "feel" a buy order coming and can dart in front of them and ensure that the buyers pay a little bit more than they were going to, without noticing a thing.

These operators begin each day owning no shares and end each day in the same position, but they make a lot of money by doing thousands of trades every day: it's a high-volume, low-margin business."