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I'm reading this introduction to PFOF.

https://centerpointsecurities.com/payment-for-order-flow-guide/

It claims that those buying flow are allowed to front-run that flow. For example, if a customer sends a buy order to $3 and the current best offer is $2.99, the HFT firm is allowed to buy in the lit market at $2.99 and then fill the customer at $3.

Is that legal? I thought that the HFT firm was required to give better-or-same as the current best offer?

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  • Welcome new uers, Just two points, (1) there is the "averaging" thing at play (search down to 'bundle retail orders') (2) also - so what? You've "discovered" so to speak a hot issue. It even mentions in that primer, "There is much controversy about the ramifications of order flow arrangements." (Unfortunately) your observation would be like making a post "I've noticed that shockingly, congresspeople add items that favor their own districts to bills!" :) you know?
    – Fattie
    Feb 2, 2021 at 23:07
  • That web site actually has a completely reasonable explanation of candles (centerpointsecurities.com/candlestick-charts) which will be very handy for the endless questions on here like "how do I make 18% compound per month with candlestick charts and which broker should I use". Good web site, bravo!
    – Fattie
    Feb 2, 2021 at 23:10

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