&gt;How could the economic effect be the same?<p>If a value trader goes and does a lot of good research on a company and then executes smart trades based upon that research they will make a profit. All well and good.<p>If a value trader goes and does a lot of good research on a company and executes some smart trades based upon that and their broker front runs them, a substantial portion of their profits are handed over to the broker. Not good. Value trader may not bother doing all that research in future (market for lemons; equity market becomes ever more disconnected from the real world). Broker parasitically extracted the value of value trader&#x27;s real world research from them.<p>If a value trader goes and does a lot of good research on a company and executes some smart trades based upon that and an HFT detects the trade they&#x27;re putting through and trades ahead of them using their superior speed, a substantial portion of their profits are, likewise, handed over to the HFT. Not good. Value trade probably won&#x27;t bother doing all that research in future (market for lemons).<p>Front running is <i>both</i> a principal&#x2F;agent problem and a market for lemons problem.