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This chapter identifies the main reasons why people trade. We will refer to them throughout therest of the book. Pay close attention to the distinctions between investing, speculating, andgambling. When traders confuse these important concepts, they often trade poorly. Whenregulators confuse them, they often adopt policies that hurt the markets. Consider also whyliquid markets benefit most traders. When you understand why people trade, you will appreciatewhy all market participants care about liquidity.For expository clarity, we will associate a stylized trader with each reason for trading, and wewill assume that that stylized trader trades only for that reason. In practice, traders often tradefor many reasons. The complexity of their motives explains why many traders get confused andfail to fully recognize why they trade. By considering stylized traders, we simplify ourdiscussions and ultimately make it easier for you to identify the different reasons why peopletrade.Multiple IdentitiesMany traders simultaneously invest, speculate, and gamble. They invest when they need tomove money from the present to the future. They speculate when they try to use informationabout future security prospects to obtain a better return on their investments. They gamble whenthey focus more attention on favorable outcomes than on losing outcomes.Their multiplicity of interests often compromises their judgment. Investors often speculatewithout thinking about whether they would be good speculators, and speculators often gamblewithout considering whether their emotional needs have influenced their judgment.Our stylized traders are profit-motivated traders, utilitarian traders, or futile traders. Profitmotivated traders trade only because they rationally expect to profit from their trades.Speculators and dealers are profit-motivated traders. Utilitarian traders trade because theyexpect to obtain some benefit from trading besides trading profits. Investors, borrowers, assetexchangers, hedgers, and gamblers are utilitarian traders. Futile traders believe that they areprofit-motivated traders. Although they expect to trade profitably, their expectations are notrational. They have no advantages that would allow them to be profitable traders. Utilitariantraders and futile traders lose on average to profit-motivated traders because trading is a zerosum game.Traders are either informed traders or uninformed traders. Informed traders can form reliableopinions about whether instruments are fundamentally undervalued or overvalued. Thefundamental value of an instrument is the value that all traders would agree upon if they knew allavailable information about the instrument and if they could properly analyze this information.An instrument is undervalued when its market price is below its fundamental value. It isovervalued when its price is above fundamental value. Since nobody actually knowsfundamental values, traders must estimate them. Informed traders typically form their opinionsfrom insightful analyses of publicly available information or from simple analyses of informationthat is not widely known. Informed traders speculate on their information by buyingundervalued instruments and selling overvalued instruments. Informed traders are thereforeprofit-motivated traders. Uninformed traders do not know whether instruments arefundamentally undervalued or overvalued. Either they cannot form reliable opinions aboutvalues, or they choose not to. Uninformed traders include utilitarian traders, futile traders, andsome types of profit-motivated traders.©2002 Oxford University Press
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Our discussion starts with and primarily focuses on utilitarian traders. At the end of the chapter,we will introduce the profit-motivated traders and the futile traders. Detailed discussions of howthey behave appear in subsequent chapters devoted exclusively to their various styles.8.1 Utilitarian TradersUtilitarian traders trade to obtain some benefit besides trading profits. Investors and borrowerstrade to move money forward or backward through time. Asset exchangers trade to exchangeone asset for another asset of greater value to them. Hedgers trade to exchange risks. Gamblerstrade for entertainment. Fledglings trade to learn how to trade. Cross-subsidizers trade totransfer wealth to other people. Tax-avoiders trade to minimize their taxes by exploiting taxloopholes. We will consider each of these traders in turn.
8.1.1 Investors and BorrowersPeople often need to move money from one point in time to another. Workers need to movetheir current earnings from the present to the future to finance their retirements. Students need tomove their future earnings to the present to pay tuition. Young couples need to move their futureearnings to the present to buy houses.These problems are all examples of intertemporal cash flow timing problems. People faceintertemporal cash flow timing problems when their incomes and expenses do not alwayscoincide. When their incomes are more than their expenses, they invest money to move moneyinto the future, or they repay money that they borrowed from the past. When their incomes areless than their expenses, they borrow money from the future, or they liquidate investments thatthey made in the past. People invest, borrow, liquidate, and repay to move money forward orbackward through time.Corporations and governments also face intertemporal cash flow problems. The most commonproblem that corporations face is inadequate current cash flow to pay for investments that willgenerate future revenues. To solve this problem, they borrow money from the future by sellingbonds or stock shares. Governments most commonly borrow against their future tax revenues tofinance current spending. They may use the money to fund projects that will produce benefits inthe future, to fund current services, or to enrich poor people, disabled people, retirees,immigrants, and in many cases, farmers and manufacturers.Although people, corporations, and governments invest and borrow to move money throughtime, in aggregate, no money actually moves through time. Instead, for every dollar invested,someone must borrow a dollar. The assets that investors use to move money from the present tothe future therefore are the same assets that borrowers use to move money from the future to thepresent. Traders buy assets when they want to move money to the future, or when they repaymoney that they previously moved from the present to the past. They sell assets when they wantto move money from the future to the present, or when they redeem money that they have movedfrom the past to the present.Investors use various financial and real assets to move money forward through time. Financialassets include stocks, bonds, mutual funds, insurance policies, certificates of deposit, demanddeposits, and currencies. Real assets include real estate, machinery, commodities, preciousmetals, and going business concerns. Those investors who cannot, or who would rather not,
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Chapter 9Good MarketsMarket structures have changed significantly in the last few years, and many more changes areunder consideration. Throughout the world, people actively debate the following questions:•••••••••••
Should regulators consolidate all orders into a central limit order book?Should markets use quote-driven or order-driven systems?Should regulators allow internalization and preferencing?Should regulators impose price limits or trading halts on trading?Should trading use floor-based or screen-based systems?Should dealers yield to their customers?Should regulators require that markets be linked electronically? How fast should those linksbe?What trading hours should markets adopt?Who should be able to see the limit order book?Who owns market data?What securities and contracts should regulators allow exchanges to trade?
The markets have wrestled with these and many other issues in recent years. They undoubtedlywill continue to do so.Virtually any change in market structure will have significant economic effects on our markets.Trading rules, trading systems, and information protocols all affect liquidity, transaction costs,volatility, the quality of prices, and the distribution of trader profits. We therefore must carefullyconsider whether proposed changes in market structure are desirable. This chapter introduces aparadigm for how we should make these decisions.Everyone has an economic interest in how markets should be organized since everyone—whether they trade or not—benefits from having well-functioning markets. Not surprisingly,opinions about market structure vary widely.Many people try to influence market structure:•
Legislators pass laws that dictate structures.
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Regulators interpret those laws, propose new ones, and selectively enforce them.
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Government administrators propose laws, veto laws, and use their influence in a myriad ofways to promote their interests. In some countries, they also write the laws.
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Judges interpret laws and write new case law.
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Exchanges, brokers, clearing agencies, and information providers freely create any marketstructures that the legal system permits. They also frequently propose—and sometimes evenimplement—structures that laws and regulations do not currently permit.
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Issuers influence market structure through the decisions they make about where to list theirsecurities.
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Traders likewise influence market structure through the decisions they make about where totrade.
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Investors and the general public influence market structure by voting for politicians thatfavor their interests and by lobbying those politicians.
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Finally, the leaders of trade organizations, public interest groups, and watchdog agenciesoften lobby on behalf of their constituents.
These people all discuss market structure with those who have power to promote or frustratetheir interests.Debate generally is most productive when conducted within a framework for making decisions.Welfare economics provides such a framework. Welfare economics is the branch of economicsthat considers how we should organize our economy. In this chapter, we consider principals bywhich we should organize our markets.How markets should be organized is completely subjective. Everyone is entitled to his or herown opinion. Many people think that markets should do well whatever it is that they do.Accordingly, we will closely consider the benefits that markets produce for our economy. At theend of this chapter, I provide a set of weak objectives that I believe regulators should use whenevaluating alternative market structures. You may have your own opinion about what are goodmarkets.If you agree that markets should be organized to maximize the benefits that they produce for theeconomy, then you must be familiar with these benefits so that you can consider them when youevaluate alternative policies. If you believe that markets should be organized to promote otherobjectives, you should at least be aware of the costs to the economy of the policies that yourobjectives favor.Even if you have no interest in influencing market structures, you should find these discussionsinteresting. Well-functioning markets are largely responsible for the tremendous wealth that freemarket-based economies have generated and continue to generate. This chapter helps explainwhy some countries are rich while other countries are poor.We start our discussion with a brief introduction to welfare economics. The discussion thenturns to the benefits that markets produce for individuals and for the wider economy. If youronly interest in this book is to become a better trader, you can safely skip this chapter.9.1 Welfare EconomicsWelfare economics involves positive and normative economic analyses. In positive economicanalyses, analysts use theories and empirical evidence to predict the consequences of variouseconomic policies. Positive economics is objective in the sense that analysts who use the sameassumptions and the same data should obtain the same results. In normative economic analyses,analysts argue for specific economic policies. Normative economics is highly subjective.Everyone is entitled to his or her own opinion about what should be.Normative analysts arrive at their conclusions by finding the policy that maximizes a subjectivemeasure of social welfare. The conclusions may flow from formal mathematical models basedon rigorous statistical analyses or from simple heuristic arguments based on best guesses. Eitherway, a proper normative argument has four parts:©2002 Oxford University Press
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1. An identification of all reasonable alternative policies.2. A specification of subjective criteria for evaluating the alternative policies. The criteriadescribe a social welfare function that measures the value of each policy. If the socialwelfare function is based on multiple criteria, it must specify the acceptable trade-offs amongthe various criteria.3. A positive economic analysis that evaluates the social welfare of each alternative policy.4. An identification of the policy that produces the greatest social welfare.All normative analysts should follow this procedure. In practice, most follow it implicitly ratherthan explicitly. This procedure provides a valuable framework for debate because it clearlyidentifies the criteria upon which analysts base their conclusions. Without this discipline,proponents of a policy often argue for it as though it were the objective rather than the path tosome commonly agreed upon objective. When policy becomes the objective rather than themeans to the objective, poor results often follow.Do Economists Disagree Much?The public widely believes that economists rarely agree with each other. Consider the popularjoke, “Put two economists in a room, and you get three opinions.”Economists actually agree more than they disagree. They appear to disagree a lot because peopleremember controversies more than agreements. Since economic controversies interest us,economists often appear to disagree.When economists disagree about positive analyses, they usually have based their analyses ondifferent assumptions or different data. Since analysts must make many decisions about whichassumptions and which data to incorporate into their studies, policymakers must be careful wheninterpreting economic analyses. They must ensure that the subjective biases of the analysts donot influence their results.When economists disagree about assumptions and relevant data, we need a set of principles toevaluate the decisions that underlie their analyses. The norms of economic science provide uswith these principles: We should evaluate assumptions by how well they represent the essentialreality of the problem at hand rather than whether we like their policy implications. Likewise,we should evaluate data by how well they characterize relevant past experience rather than bywhether we like their policy implications.When economists disagree about normative analyses, they usually have employed differentsocial welfare functions. Economists—like everyone else—have different opinions as to what isgood and valuable. Policymakers must consider whether they agree with the analyst’s valuesbefore accepting the conclusions of a normative analysis.
9.1.1 Market Welfare EconomicsTo decide public policy in the markets, we need an objective by which we can measure themerits of alternative policies. Many people believe that we should design markets to do wellwhatever it is that they do. Whether you subscribe to this objective or not, you must understandwhat markets do to responsibly evaluate public policy.
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Part IIISpeculatorsWe now turn our attention to the three main types of profit-motivated speculators.We consider informed traders in the Chapter 10. Informed traders are well informed aboutfundamental values. Their trading makes prices more informative.We study order anticipators in Chapter 11. Order anticipators are well informed about whatother traders intend do. They front run other traders and thereby reduce their profits. Theirtrading often makes prices less informative.In Chapter 12, we examine bluffers. Bluffers try to fool other traders into believing that theyhave information about future price changes. Their trading usually makes prices lessinformative.
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Chapter 10Informed Traders and Market EfficiencyInformed traders are speculators who acquire and act on information about fundamental values.They buy when prices are below their estimates of fundamental value and sell when prices areabove their estimates. Informed traders include value traders, news traders, informationoriented technical traders, and arbitrageurs.In this chapter, we will consider how informed traders trade, and how their trading makes pricesinformative. We will pay special attention to why some informed traders make money whileothers do not. We also will explain why prices cannot be completely informative. This chapterwill help you understand how informed traders make money, when they make money, and thelimits to how much money they can make.Informed trading may interest you for at least three reasons. First, you may be an informedtrader yourself. If your trading decisions depend in any way on opinions you form aboutfundamental values, you are an informed trader. Unfortunately, most traders who believe thatthey are informed traders do not trade profitably because they are not truly well informed. Theprinciples we will discuss in this chapter should improve your trading by helping you predictwhen you will trade profitably.Second, you must understand informed trading to understand the risks that traders face whenthey offer liquidity. In Chapter 13 (Dealers), we show that dealers and other traders who supplyliquidity lose to well-informed traders. The profitability of dealer operations therefore dependscritically on how dealers cope with informed traders. If you intend to be a dealer, if you intendto trade with them, or if you intend to offer liquidity yourself, you must understand informedtrading.Finally, you must understand informed trading to see how prices become informative. A price isinformative when it is near its corresponding fundamental value. Informative prices areextremely valuable to the economy because they help us allocate resources efficiently. To fullyappreciate how market-orientated economies work, you must understand how informed tradersmake prices informative.10.1 Fundamental ValuesTo discuss informed trading, we must distinguish between market values and fundamentalvalues. The market value of an instrument is the price at which traders can buy or sell theinstrument. The fundamental value (or intrinsic value) is the “true value” of the instrument. Infinancial terms, fundamental value is the expected present value of all present and future benefitsand costs associated with holding the instrument. Everyone would agree upon this value if theyall knew everything known about the instrument, if they all used the proper analyses to predictand discount all uncertain future cash flows, and if they all perceived the benefits and costs ofholding the instrument equally. Since these conditions never occur, traders often differ in theiropinions about fundamental values. This chapter examines how informed traders estimatefundamental values, and how they trade upon their estimates.Fundamental values are not perfect foresight values. Fundamental values depend only oninformation that is currently available to traders. Perfect foresight values depend on all current©2002 Oxford University Press
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and future information about values. Fundamental values are the best estimates of perfectforesight values.Prices are completely informative when they equal fundamental values. Efficient marketsproduce prices that are very informative. The difference between fundamental value and marketvalue (price) is noise. Informed traders try to identify the noise in prices by estimatingfundamental values. Since we do not observe fundamental values, we cannot easily determinewhether prices are informative or noisy.Fischer Black on NoiseFischer Black was a mathematician who made many seminal contributions to the development offinancial theory. Perhaps most notably, he helped develop option-pricing theory, for whichMyron Scholes and Robert Merton received the 1997 Nobel Prize in Economic Science. HadFischer not died two years before the Prize was awarded, he undoubtedly also would have been aNobel laureate.In his 1985 presidential address to the American Finance Association, Black offered a nowfamous opinion about noise. He believed that we should consider stock prices to be informativeif they are between one-half and twice their fundamental values! Most economists believe thatthe prices of actively traded securities are well within these extreme bounds, but no one canknow for sure.Source: Fischer Black, 1986, “Noise,” Journal of Finance 41(3), 529-543.
Changes in fundamental values are completely unpredictable. Since fundamental values reflectall available information, they change only when traders learn unexpected new fundamentalinformation. If fundamental value changes were predictable, current fundamental values wouldnot fully reflect the information upon which the predictions are based. Fundamental valuechanges therefore must be unpredictable. Since prices are very close to fundamental values inefficient markets, price changes in efficient markets are quite unpredictable.When traders cannot predict future price changes, statisticians say that prices follow a randomwalk. Plots of random walks through time look like paths that wander up or down at randombecause random walks are completely unpredictable.10.2 Informed TradersInformed traders estimate fundamental values. They may base their estimates on privateinformation that only they have, or on public information that any trader can obtain. Informedtraders compare their value estimates with the corresponding market prices. They considerinstruments to be undervalued if prices are less than their estimates of fundamental value, andovervalued if prices are greater.Informed traders buy instruments that they believe are significantly undervalued and sellinstruments that they believe are significantly overvalued. They hope to profit when the pricesof their purchases rise, and when the prices of their sales fall. Informed traders naturally hopethat these price changes will occur quickly.Informed traders lose money when they estimate fundamental values poorly. When their valueestimates are wrong, they pay too much for instruments they have overvalued, and they sell too©2002 Oxford University Press
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cheaply those instruments that they have undervalued. Informed traders who consistentlyestimate values poorly usually quit trading when they have lost more money than they cantolerate or when bankruptcy forces them out of the markets.Informed traders also can lose money even if they accurately estimate fundamental values. Thishappens when prices move away from fundamental values rather than towards them. Theselosses, however, tend to be short-term losses. In the long run, prices usually revert toward theirfundamental values so that well-informed traders ultimately profit.Even if prices never adjust to their fundamental values, well-informed traders who have correctlyestimated values still can profit from their trades if they are patient. When they buy anundervalued instrument, they acquire the rights of ownership for less than their aggregate value.By holding the instrument, they will eventually receive the benefits of these rights—typicallyinterest, dividends, royalties, capital repayments, or liquidating distributions—at a lower pricethan they could otherwise obtain them. When they sell overvalued instruments, they can investthe proceeds in instruments with higher expected rates of return.10.3 Informed Traders Make Prices InformativeInformed traders, like all other traders, often significantly impact prices when they trade. Theirbuying tends to push prices up, and their selling tends to push prices down. Since they buy whenprice is below their estimates of fundamental value and sell otherwise, the effect of their tradingis to move prices toward their estimates of fundamental value. Their trading therefore causesprices to reflect their estimates of fundamental value. When informed traders accurately estimatevalues, their trading makes prices more informative.Informed traders generally differ in their estimates of value. This often happens when they basetheir estimates on different data. Informed traders often trade with each other so that the priceimpacts of their trading tend to cancel. The net impact of their trading is a market price thatreflects an average of their different value estimates. This price usually is more informative thanare any of the individual value estimates. Markets aggregate data from many sources to produceprices that typically estimate fundamental values more accurately than can any individual trader.An Algebraic IllustrationThis box presents an algebraic illustration of how markets aggregate information. If you are notcomfortable with algebra and symbolic notation, skip it. The exercise only illustrates pointsmade in the text.Suppose that N traders each produce a different forecast of the true value of a security. Let fi bethe forecast of the ith trader and assume that it is an unbiased estimate of V, the true fundamentalvalue. We can represent the forecast as f i = V + ei where ei is the error in the ith trader’sforecast. The expected forecast error is zero because the forecasts are unbiased. The individualforecast errors might be quite large in absolute value, however.Let each trader’s desired position in the security, Di, be proportional to the difference betweenher forecast of value and the market price, i.e., Di = a f i − P where a is some constant ofproportionality, and P is the market price. This assumption ensures that trader i will want a longposition if her forecast is greater than the market price and a short position otherwise. It also
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Chapter 11Order AnticipatorsOrder anticipators are speculators who try to profit by trading before other traders trade. Theymake money when they correctly anticipate how other traders will affect prices or when they canextract option values from the orders that other traders offer to the market.Order anticipators include front runners, sentiment-oriented technical traders, and squeezers.Front runners collect information about trades that other traders have decided to arrange.Sentiment-oriented technical traders try to predict trades that uninformed traders will decide tomake. Squeezers try to exploit traders who must trade by cornering the market.Order anticipators are parasitic traders. They profit only when they can prey on other traders.They do not make prices more informative, and they do not make markets more liquid. To tradeprofitably, you must avoid these traders. You therefore must understand how they trade.Large traders are especially vulnerable to order anticipators. You must be familiar with parasitictraders to understand how large traders expose their orders.Some front runners obtain their information about trader intentions from brokers. If you tradewith brokers, if you are a broker, if you are interested in becoming a broker, or if you regulatebrokers, you must know how brokers occasionally unwittingly or intentionally expose orders.Trading by order anticipators often makes prices more volatile and markets less efficient. Ifvolatility and price efficiency interest you, you must consider how order anticipators affect themarkets.Uninformed traders sometimes significantly affect prices. Traders who can predict whatuninformed traders will do therefore can sometimes profit from that knowledge. If you havethese skills, how sentiment-oriented technical traders trade should interest you.Even if you cannot predict what uninformed traders will do, you may be able to identify whatuninformed traders have done after the fact. Although you cannot profit directly from thisinformation, you can use it to better understand why your trading strategies worked or failed.Understanding how sentiment-oriented technical traders collect and process information willhelp you to better understand uninformed traders.In markets that enforce time precedence, order anticipators must improve price by at least theminimum price increment to trade ahead of other traders. The size of the price incrementtherefore greatly affects the profitability of order anticipator strategies in such markets. Youmust be familiar with how order anticipation trading strategies to form reasonable opinions aboutthe proper size of the minimum price increment.11.1 Front RunnersFront runners collect information about trades that other traders have decided to arrange. Theythen try to trade before those traders complete their trades. Front runners may obtain theirinformation from public sources, from the traders they front run, or from brokers. Practitionerscall them front runners because they hurry (run) to trade before (in front of) other traders.
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Front-running strategies differ according to the type of trader that they front run. Front runnersmay trade in front of aggressive traders or passive traders. Aggressive traders demand liquiditywhile passive traders offer liquidity.11.1.1 Front Running Aggressive TradersAggressive traders usually issue market orders. Their demands often push prices up when theybuy and push prices down when they sell. Front runners who trade ahead of aggressive tradersprofit from the price impact of the aggressive traders’ trades.
In most markets, front running is illegal when the front runner improperly obtains informationabout the incoming order. Front runners obtain information improperly when they violate aconfidential brokerage relationship or when they eavesdrop on confidential communications.These violations may take place at any point between the receipt of the order by the broker andits final execution.An Illegal Front-running Scheme Involving a Violation of Confidentiality
Rob is a runner who works for a large brokerage house on the floor of a futures exchange. Rob’sjob is to carry orders from his firm’s telephone booth on the perimeter of the exchange floor tohis firm’s brokers in various trading pits.Nate trades commodity futures for his own account in one of those pits. He and Rob havearranged a set of signals by which Rob can surreptitiously tell Nate that he is carrying a large buyor sell order. They may convey their signal by a glance at a clock, by the hand in which Robcarries the order, by the placement of a pen in a pocket or behind an ear, or by some other means.Rob and Nate employ a variety of signals to make it difficult for anyone to detect what they aredoing.When Nate sees the signal for a large buy order, he immediately buys contracts for his ownaccount. After Rob delivers the order to his firm’s broker, the broker buys contracts to fill it.Nate profits as the broker pushes the price up to fill the order. Nate sometimes even sells hisnewly acquired contracts to the broker. Afterwards, Nate and Rob split the profits.Their profits come at the expense of the broker’s customers. The customers pay higher priceswhen buying and obtain lower prices when selling because Nate takes liquidity that theyotherwise would have taken.This scheme is very difficult to detect in actively traded markets. To prevent it, brokerage firms,their customers, and exchanges must carefully watch how prices change before and after ordersarrive. They must try to remember who traded before large orders arrived so that they canidentify systematic patterns that might suggest a front-running problem.Brokers also must secure their communications to prevent these schemes. At several exchanges,new wireless electronic order delivery systems eliminate the need for floor runners and therebyremove potential for fraud in that link of the order transmission chain.Not all front running is illegal. Observant traders on the floor of an exchange can often infer anorder from how a broker handles it. Brokers must be especially careful to avoid revealing theirorders inadvertently.
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Legal Front Running by an Observant Trader
Rifka and Jon have both traded on the same options floor for years. Although they are notfriends, their close proximity to each other has allowed them to become very well acquainted.Rifka trades for her own account. Jon is a floor broker for a large firm.Rifka has noticed that Jon behaves slightly differently when he receives a large order than asmall order. The differences are very subtle; Rifka cannot even articulate what she sees. Shejust knows from experience when Jon has a large order.Jon’s behavior does not reveal whether the order is a buy or sell order. Rifka often guessescorrectly since she has noticed that Jon tends to buy after he has bought and sell after he hassold: At least one of Jon’s clients probably splits his or her large orders.When Rifka suspects that Jon has received a large order, she will try to front run it. If she feelsconfident about the side of the order, she may try to beat Jon to the market. Otherwise, she willwait to see which side Jon needs to trade. She may then better his price and hope to make aprofit when Jon’s client returns to the market.Rifka’s trading is legal. Her profits come from recognizing Jon’s shortcomings as a broker andfrom noting that Jon’s clients tend to split their orders. She is a profitable trader because she isobservant and because she acts quickly on her information.Front runners sometimes also obtain information about orders when brokers call them to arrangetrades. Brokers who want to arrange a large trade must call traders who they think might bewilling to take the other side. They often reveal their orders in these calls. Although frontrunners may legally exploit this information, those who do risk harming their relationships withthese brokers. Brokers must be very careful to expose orders only to those traders who will mostlikely take the other side. They most avoid exposing their orders to traders who would front runtheir clients.Shop the Block
Brokers shop the block when they expose large orders. Not surprisingly, prices tend to rise whenthey widely shop a large block buy order, and fall when they widely shop a large block sellorder.Front runners capture the benefits of price