Name the main kinds of electronic trader and set out how they differ
The idea
News traders react quickly to information releases. Electronic dealers, or market makers, post bid and ask quotes and earn the spread. Buy-side traders use algorithms to execute institutional orders at low cost, splitting large orders to reduce impact. Arbitrageurs exploit price differences across venues or related instruments, aligning prices. Front runners try to detect large incoming orders and trade ahead of them. Quote matchers place orders just inside those of a large visible trader, using that trader as a free option. Some types provide liquidity and improve price discovery, while others extract value from slower participants. A trap is treating all high-speed trading as harmful; dealers and arbitrageurs often narrow spreads.
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