"Otherwise the HFT spots it (and they usually do) and then front runs all of the trades, just skimming pennies off. What use are they ?"
So when BigMutualFund decides they want to buy 50 Million Shares of MegaCorp they try to disguise their order so that the share price of MegaCorp doesn't go up to much as they make their buy. That's absolutely right.
You're also absolutely right that HFTs have made it harder to disguise this action. The HFTs "see" what's going on and start buying shares of MegaCorp at a higher price and then selling them to BigMutualFund. So BigMutualFund makes a bit less money.
So where does BigMutualFund's go? To the HFTs? NO! The HFTs aren't changing the spread width, so they aren't making more money.
You know who makes more money? The current shareholders of MegaCorp who decide that they want to sell! And that's great! Whatever information it was that made BigMutualFund think that now was the time to buy gets communicated to the market faster (in terms of the share price) because of the great work the HFTs are doing.
So when BigMutualFund decides they want to buy 50 Million Shares of MegaCorp they try to disguise their order so that the share price of MegaCorp doesn't go up to much as they make their buy. That's absolutely right.
You're also absolutely right that HFTs have made it harder to disguise this action. The HFTs "see" what's going on and start buying shares of MegaCorp at a higher price and then selling them to BigMutualFund. So BigMutualFund makes a bit less money.
So where does BigMutualFund's go? To the HFTs? NO! The HFTs aren't changing the spread width, so they aren't making more money.
You know who makes more money? The current shareholders of MegaCorp who decide that they want to sell! And that's great! Whatever information it was that made BigMutualFund think that now was the time to buy gets communicated to the market faster (in terms of the share price) because of the great work the HFTs are doing.
More efficiency for all!