Comment Re:Banks deflecting attention from themselves (Score 2) 342
As for the front-running nonsense on 60 Minutes, that's always been illegal (contrary to what we're being told), and it is not at all how high frequency trading works. If someone was in fact doing that, then they're in a whole world of hurt with the SEC (and rightly so), but this entire exercise appears much more like a distraction: blame small outsider firms who've made the marketplace more effecient and tightened spreads for problems created by corruption within the big banks, and hope no one notices...at least until the next bank-induced crash.
This is absolutely not illegal. Here's how HFT gets one of its profit lines:
Large trades often spread across multiple exchanges. Buy 30,000 shares here, 15,000 there, etc... The regular broker submits one purchase and it gets distributed across exchanges. As soon as it hits the first exchange, say after 30ms, an HFT algo picks up on the trade and assumes that it'll happen as well on the other exchanges. So it races ahead and front-runs in the other exchanges before the regular distributed trade has a chance to arrive there.
There is nothing illegal whatsoever, since the trades are public. It's just that the HFT optimized their routes.