Its a somewhat leaky metaphor I grant you. So how does Bill have information about what Joe is doing? Joe certainly tries not to telegraph such things for obvious reasons.
From what I've gathered, through methods like "pinging" the market with many tiny transactions in likely spots, Bill can sound out what Joe is doing in the sheep market. Supposedly the market exchange will also "flash" the information about buy and sell orders to the HFT's in favorable network locations a few ms faster than the general public as well. Figuring out that Joe is buying sheep are what all of the "brilliant minds" that are heading into HFT everyone is talking about are doing. They're watching the road for Joe.
Also Joe is not a small investor, he's a rancher that buys lots of sheep. Small investors don't place the kind of orders that HFT can attack.
Do note that this metaphor really only applies to the Front Running section of HFT, and really evolved from a fanciful attempt to coagulate network layer and application layer solutions into one magical unicorn fix. (Its kind of more about how tc works in linux than how markets work. :) )
From what I've gathered, through methods like "pinging" the market with many tiny transactions in likely spots, Bill can sound out what Joe is doing in the sheep market. Supposedly the market exchange will also "flash" the information about buy and sell orders to the HFT's in favorable network locations a few ms faster than the general public as well. Figuring out that Joe is buying sheep are what all of the "brilliant minds" that are heading into HFT everyone is talking about are doing. They're watching the road for Joe. Also Joe is not a small investor, he's a rancher that buys lots of sheep. Small investors don't place the kind of orders that HFT can attack.
Do note that this metaphor really only applies to the Front Running section of HFT, and really evolved from a fanciful attempt to coagulate network layer and application layer solutions into one magical unicorn fix. (Its kind of more about how tc works in linux than how markets work. :) )