As I say, I&#x27;m not sure anyone&#x27;s done anything exactly unethical -- but the final result can be <i>very unsatisfactory</i> even so.<p>Still, let&#x27;s see. Suppose a hedge fund discovers a pattern in the trades made by certain large pension funds. (Example: suppose there is some regulation that limits how much of any one asset they can hold at the end of each calendar month, and this leads to somewhat-predictable selling on the last trading day of each month.) They find that they can make money by selling (short if necessary) a lot of these assets the day before, and then buying them back after the pension funds make their trades. The pension fund managers don&#x27;t have the option of changing when they make those trades, because there&#x27;s an annoying law restricting what they do. End result: everyone whose pension is in the pension fund ends up just a tiny bit poorer, and the hedge fund is just a bit more successful.<p>(Who loses? Pension funds; hence, investors in pension funds.)<p>Or let&#x27;s take your HFT example (though I think most hedge funds are not in the HFT business and don&#x27;t really care about shaving a few microseconds off their latencies). So, we have an HFT firm. They pay that huge sum of money to the people who run the stock exchange to get their machines colocated. Now they, instead of their rivals who don&#x27;t have the colocated machines, get to do all the market-making trades; their trading volume goes up, their rivals&#x27; goes down, and they make a pile of extra money. Those few microseconds of lower latency don&#x27;t benefit the other people they trade with -- they matter only to HFT firms. And their rivals can&#x27;t make up for it by quoting lower spreads, because prices are quantized and the very small price reduction that would be appropriate simply isn&#x27;t possible. All that&#x27;s happened is that our HFT firm has paid a pile of money to the exchange, and now they get to make more of the trades. This is the exact same structure as if they&#x27;d bribed the exchange for preferential treatment instead.<p>(Who loses? Other market-making traders, which pretty much means other HFT firms.)<p>In each of these scenarios, no one is <i>stealing</i> from anyone else. Nothing illegal is going on. But both of them are zero-sum: our protagonists are making more money and someone else is making less. (<i>Almost perfectly</i> zero-sum. In the first case, the price distortions arising from the pension funds&#x27; artificially constrained trades are smoothed out a bit. In the second, people trading with the HFT firm get their orders filled a few microseconds earlier.) Is it <i>unethical</i>, exactly? I dunno, and in any case your values and mine may not coincide. But the pattern each time is the same as when I put up a net that extends over your garden and catches some of the money raining from the sky: I have invested time and effort, with the consequence that I am a bit richer and you are a bit poorer.