{"id":19323,"date":"2021-08-10T08:03:27","date_gmt":"2021-08-10T08:03:27","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=19323"},"modified":"2026-06-26T20:01:08","modified_gmt":"2026-06-26T20:01:08","slug":"distinguish-among-types-of-electronic-traders","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/distinguish-among-types-of-electronic-traders\/","title":{"rendered":"Types of Electronic Traders"},"content":{"rendered":"\r\n<script type=\"application\/ld+json\">\r\n{\r\n  \"@context\": \"https:\/\/schema.org\",\r\n  \"@type\": \"QAPage\",\r\n  \"mainEntity\": {\r\n    \"@type\": \"Question\",\r\n    \"name\": \"Low-latency traders, who use artificial intelligence to find out when large traders or fragments want to fill orders on the same side of the market, are best known as:\",\r\n    \"answerCount\": 3,\r\n    \"acceptedAnswer\": {\r\n      \"@type\": \"Answer\",\r\n      \"text\": \"The correct answer is A. Electronic front runners. Electronic front runners are low-latency traders who use artificial intelligence and fast trading systems to detect when large traders or order fragments are likely to trade on the same side of the market. They attempt to profit by buying ahead of expected buy pressure or selling ahead of expected sell pressure.\"\r\n    },\r\n    \"suggestedAnswer\": [\r\n      {\r\n        \"@type\": \"Answer\",\r\n        \"text\": \"Electronic front runners.\"\r\n      },\r\n      {\r\n        \"@type\": \"Answer\",\r\n        \"text\": \"Electronic dealers.\"\r\n      },\r\n      {\r\n        \"@type\": \"Answer\",\r\n        \"text\": \"Electronic new traders.\"\r\n      }\r\n    ]\r\n  }\r\n}\r\n<\/script>\r\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/-REW7IWLGsM\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\r\n<p>Electronic trading strategies are most effective because they act on information extremely fast. They have been adopted by proprietary traders, buy-side traders, and the automated brokers that serve the systems.<\/p>\r\n<p>Electronic proprietary traders consist of high-frequency and low-latency traders.<\/p>\r\n<p>The major types of electronic traders include:<\/p>\r\n<ol>\r\n\t<li><strong>Electronic news traders<\/strong>: These are traders who profit from news services. They subscribe to a high-speed automatic news feed. They analyze the news very fast and decide whether the information they have will be moved to the market or not. These traders use natural language processing techniques when the report consists of non-quantitative data.<\/li>\r\n\t<li><strong>Electronic dealers<\/strong>: These are traders who make a profit from their market spreads. When they receive a sign that prices might move against their inventory positions, they instantly liquidate their positions by operating on the opposite side to reduce their exposure. They also monitor scheduled news releases and cancel their orders when necessary.<\/li>\r\n\t<li><strong>Electronic front runners<\/strong>: These are low-latency traders who use artificial intelligence to find out when large traders or fragments want to fill orders on the same side of the market. They purchase when they think that an imbalance of buy orders over sell orders will cause the market to move up and sell when they feel the imbalance will lower the demand.<\/li>\r\n\r\n<div style=\"margin: 18px 0;\"><a style=\"display: block; text-align: center; padding: 14px 18px; border: 2px solid #2F5BFF; border-radius: 18px; color: #ffffff ; font-weight: 600; font-size: 16px; text-decoration: none; background-color: #1a73e8 ;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\">Practice electronic trader types with our CFA Free Trial.<\/a><\/div>\r\n\r\n\t<li><strong>Electronic arbitrageurs<\/strong>: These are traders who monitor several markets looking for arbitrage opportunities to buy an undervalued item and sell a similar overvalued item.<\/li>\r\n\t<li><strong>Electronic quote matchers<\/strong>: These are traders who exploit the option value of standing orders. These options are important to quote matchers because they allow them to take positions with limited losses. They buy when they believe that they can rely on standing buy orders to get out of their positions and sell when they can depend on standing sell orders.<\/li>\r\n<\/ol>\r\n<blockquote>\r\n<h2>Question<\/h2>\r\n<p>Low-latency traders, who use artificial intelligence to find out when large traders or fragments want to fill orders on the same side of the market, are <em>best<\/em> known as:<\/p>\r\n<ol type=\"A\">\r\n\t<li>Electronic front runners.<\/li>\r\n\t<li>Electronic dealers.<\/li>\r\n\t<li>Electronic new traders.<\/li>\r\n<\/ol>\r\n<h4>Solution<\/h4>\r\n<p><strong>The correct answer is A.<\/strong><\/p>\r\n<p>Electronic front runners are low-latency traders who use artificial intelligence to find out when large traders or fragments want to fill orders on the same side of the market. They purchase when they think that an imbalance of buy orders over sell orders will cause a market to move up and sell when they feel the imbalance will lower demand.<\/p>\r\n<p><strong>B is incorrect.<\/strong>\u00a0Electronic dealers are traders who make a profit from their market spreads. When they receive a sign that prices might move against their inventory positions, they instantly liquidate their positions by operating on the opposite side to reduce their exposure. They also monitor scheduled news releases and cancel their orders when necessary.<\/p>\r\n<p><strong>C is incorrect.<\/strong>\u00a0Electronic new traders are traders who profit from news services. They subscribe to high-speed automatic news feed. They analyze the news very fast and decide whether the information they have will be moved to the market or not. These traders use natural language processing techniques when the report consists of non-quantitative data.<\/p>\r\n<\/blockquote>\r\n<p>Reading 46: Trading Cost and Electronic Markets<\/p>\r\n<p><em>LOS 46 (f) Distinguish among types of electronic traders.<\/em><\/p>\r\n\r\n<div style=\"text-align: center; margin: 30px 0;\"><a style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 26px; border-radius: 9999px; background: #1e5bd8; color: #ffffff; font-weight: bold; text-decoration: none;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"> Start Free Trial \u2192 <\/a> <p style=\"margin-top: 12px; font-size: 16px; line-height: 1.5;\">Review how to distinguish among types of electronic traders with CFA Level 2 study notes, practice questions, mock exams, and video lessons designed to strengthen your exam preparation.<\/p>\r\n <\/div>","protected":false},"excerpt":{"rendered":"<p>Electronic trading strategies are most effective because they act on information extremely fast. They have been adopted by proprietary traders, buy-side traders, and the automated brokers that serve the systems. Electronic proprietary traders consist of high-frequency and low-latency traders. The&#8230;<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[102,473],"tags":[216,564],"class_list":["post-19323","post","type-post","status-publish","format-standard","hentry","category-cfa-level-2","category-portfolio-management","tag-cfa-level-2","tag-portfolio-management","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Types of Electronic Traders | CFA Level II<\/title>\n<meta name=\"description\" content=\"Learn about different electronic traders, including proprietary, buy-side, and automated brokers, and how they use speed and information for trading strategies.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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