In reading about the various practices and strategies of high frequency traders, one of the most mysterious to me is "fleeting orders," or orders that are cancelled almost immediately after they are sent (see Hasbrouck and Saar (2011)). Why do HFTs use these orders? Some of those trying to explain the practice claim it gives HFTs an informational advantage. How? What information do they get and how do they use it?
I am hoping for someone with actual experience in HFT to answer and verify some of the hypotheses laid out by academics. In particular, one hypothesis is that rapidly cancelled limit orders bring forth market orders on the other side, which are then executed at a less favorable price also placed by the HFT. In other words, HFTs are gaming the system to exploit sub-optimal behavior by slower traders. Is there any evidence of this still occurring, now that the practice of fleeting orders is widespread and well known? This explanation would also imply that it is relatively simple to avoid being taken advantage of, thus weakening the policy implications. Is there some reason that slower traders prefer sending market orders only after seeing a limit order meeting their price target?