Fast Trader Pulled a Fast One on Some Customers

&gt; So when the SIP says that the price of a stock is $40.02, Citadel knows that it&#x27;s really $40.01, so it can buy the stock at $40.01 and sell it to you for $40.016 for a guaranteed risk-free profit.<p>This implies that Citadel is buying the stock before selling it to you. I doubt that&#x27;s the case as waiting for the ack from the exchange before handing the latency would be too high, more likely that Citadel assumes it is likely that it can buy it for that price at the same time that it is selling it to you (and that&#x27;s seems what&#x27;s implied in the FastFill description). That&#x27;s not guaranteed profit as Citadel is taking a risk (albeit small) as its buy at the better price might not be filled.<p>edit: and in fact the article later says that this risk-free arbitrage is not really risk free.

This article was about retail customers and exchanges. Sounds like they made not much money with that.<p>What the article left out is that everyone learned that this type of race arbitrage can be done. As a result a number of private microwave networks was build and this type of trade is done on a much larger scale between the exchanges now prompting institutional investors to question the fairness of the deal they are given.

Nifty. The microsecond gamers even salami slice run of the mill orders to skim profit from you.

allowing sub-penny executions by some effectively steals trades from risk takers on primary exchanges; it&#x27;s horrible for market structure and depth. the sub-penny problem is a function of another insidious practice, payment for order flow. both should be banned.