Front Running

So how could HFT firms front-run brokers? Their investments in co-location and fiber optic wiring allowed HFT firms’ computers to register the receipt of a trade performed by a trader at a brokerage firm a couple of hundred milliseconds before the trader himself. A millisecond is only one-thousandth of one second and may not seem like a material time advantage to which a human could react. To put this into perspective, consider that it takes roughly 350 milliseconds to blink an eye. However, Lewis stresses that seeing a trade just one hundred millisecond in advance might as well have been one hour in advance.  This is because of how quickly automated algorithms can use two inputs buried in the trade receipt to purchase a stock (the output). This allowed HFT firms to quickly purchase that same stock on a different exchange before the brokerage firm (whom they anticipated had already sent in an order that is due to reach the second exchange within a few hundred milliseconds).