From reader QevolveQ Holdings
Sent 10-21-10 to SEC Enforcement Division
To Whom It May Concern,
I have a question. Why does the SEC allow high frequency traders/co-location traders/etc., to front run retail orders every day in almost every security? When I say front run, I mean the practice of utilizing sub-penny orders whereby these so called traders step in front of real bids and offers by 1/100th of a penny to get the trade done, knowing there's a bid or offer right behind them. This has happened to me at least fifty times in the last year. It is particularly a problem on illiquid issues in which the sub-penny order that front runs my orders may be the only business done at that level. And so my order just sits there and never gets filled.
This exact scenario in fact happened again today, as I was a 700 share bid at $6.10 in PROV from 11:39am till the close. At 2:26pm 450 shares were executed at 6.1007. On 450 shares that is equivalent to just 31 cents better than my 6.10 bid. And that sub-penny trader got the order instead of me because they were able to front run me without even showing a bid in the market (i.e. the 6.1007 print just magically appears on the tape with no bid having been shown there in the Level II system). I would gladly have paid that price, but of course I'm retail and cannot use sub-penny increments.
I hope somebody at the SEC actually reads this. I would very much appreciate a response as well. Please tell me, why is this practice (among others) allowed for some market participants and not others? It is a complete ripoff in my opinion. Our equity market has become a total farce because such practices are allowed. I have little to no faith that I am operating on a fair and level playing field. The marketplace has become dominated by machines and those with the highest levels of capital to deploy. The average retail investor like myself is simply left to be exploited by the robots of greed. These practices are not going unnoticed, and I want to voice my opinion that this nonsense happens in the equity market every day. In my opinion, it is deplorable and likely responsible for investors' seeming lack of confidence in this rigged financial system we are forced to operate in.