21–30 of 54 posts
Let this weird parallel financial system develop for another decade and see what comes out of it. Might actually solve some problems.
Couple things. (1) The word "frontrunning" applies only in a very specific context, where you trade in front of an entity with which you have a client relationship. That is different from capturing a trading opportunity because you are faster than another party. Frontrunning is illegal and law-abiding HFT firms don't do it. They often don't even have clients to which this applies! Being faster is not illegal. Can we…
Everyone calls it MEV because of this very paper. They coined the term. You did answer your own question in (3).
Earlier quoted context omitted.
I respectfully don't think it is too harsh. Every legal definition I know of frontrunning requires a client relationship. Even in the case of "non-public" information, frontrunning refers to trading ahead of your client based on non-public information related to the clients securities. Trading on non-public information when a client is not involved is referred to as insider trading. Also in this context, the reason t…
People submitting crypto transactions to miners are their clients, as in the miners get paid when one of their transactions occur. Index front running is not illegal and is based on public information. So, this may be a form of legal front running.
Most likely none of the transaction signers qualify as clients of the miner. Transactions are transmitted over the network anonymously via a gossip protocol, and hundreds or thousands of miners have the chance to include (or not include) any transaction in a block. Transactions are selected for inclusion in a block effectively randomly, through an entirely mechanical process, and no relationship is established or maintained between the miner and any transaction sender.
In order to assert that a transaction signer is a client of the miner that builds the block that includes the transaction, you would have to redefine what the word “client” means.
Couple things. (1) The word "frontrunning" applies only in a very specific context, where you trade in front of an entity with which you have a client relationship. That is different from capturing a trading opportunity because you are faster than another party. Frontrunning is illegal and law-abiding HFT firms don't do it. They often don't even have clients to which this applies! Being faster is not illegal. Can we…
Anyone who doesn’t like crypto doesn’t have to play with it. It’s a tiny blip of nothing in size when compared to actual markets, and the “crime” that exists in crypto is nothing compared to what large banks facilitate for drug kingpins and oligarchs every single day. Let this weird parallel financial system develop for another decade and see what comes out of it. Might actually solve some problems.
Earlier quoted context omitted.
Yep, that one is my bad. That's why I added the edit.
I think (1) is a bit harsh relating to the terminology. Technically front running is based on plainly “non-public” information. The term has been generalised and expanded to include crypto transactions which are slightly more obfuscated from the average user who doesn’t sit and watch the mempool. I think the term is completely appropriate.
Trading fast based on "slightly obfuscated" public domain information is categorically not any kind of front-running. It is as far as I can see just a pure execution arbitrage.
HFT firms are re-applying a lot of techniques that worked a decade or more ago in regular markets, except now there's way less competition and way less regulation. They are making a killing right now in crypto.
In past few years, I got calls with offer to build artificial market making models (aka pump and dump) for crypto exchanges, with 7 figures payout per model + commission, I refuse to do such work, this is just disgusting, don't care how legal or illegal this is, it did not seem they have infrastructure for HFT in terms of Order Routing like it is on stock exchanges like BATS etc ...
HFT firms are re-applying a lot of techniques that worked a decade or more ago in regular markets, except now there's way less competition and way less regulation. They are making a killing right now in crypto.
Traditional HFT market-making is still somewhat competitive in crypto, and it's not helped by the fact the exchanges aren't sufficiently technologically literate to provide a fair playing ground for all participants.