Front-running is the practice of knowing what orders are coming into the market and taking action by “stepping in front of them”. Usually the practice of a broker buying a security before a large market buy from their client drives the price up, and then dumping it. The client pays the price for a more expensive security, and the broker takes the profit.
Traditional front-running is not possible since all orders are limit orders or Fills. This is fundamentally because front-running is typically done by the broker. In this case, the broker is software running on the end-user’s machine, so traditional front-running is impossible since all orders sent to the Relayer are limit orders or fills.
Spoofing is the practice of putting orders on the exchange that one has no intention of filling in order to manipulate prices. Since many traders take the depth of the orderbook into account when making decisions, depth that is “spoofed”, i.e. not real, will influence them.
Spoofing by reneging on orders is economically disincentivized since users will lose their deposit and Relayer fee on orders that are published and filled but not settled. Spoof amounts are limited by bandwidth available in Payment Channel Network channels and by amount that can be tied up in deposits and fees. Spoofing by sending orders and cancelling quickly before someone takes the order is still possible -- this is common on all mature exchanges, and extremely difficult to enforce any prohibition against without harming overall efficiency of price discovery.
Painting the tape
Painting the tape is the practice of conducting many transactions that are visible to the market between two colluding parties (who aren’t really transacting) to influence onlookers into thinking that the prices are different than they are, or that there is more action/volume than there is.
Painting the tape is fairly uneconomic thanks to the Relayer fees, but still possible. Just like many mature exchanges, this remains a difficult problem to combat.
Order suppression is the ability of the Relayer to suppress incoming orders or fills from market participants. This is fairly easy for market participants to detect, and would be uneconomic on the part of the Relayer as it would diminish its ability to collect fees.
Exposure to arbitrage
Some activities in markets create opportunities for riskless arbitrage, where savvy market participants can take profits for free. The Relayer does not perform order matching, which means some types of arbitrage (crossed order prices) are available. This type of arbitrage makes price discovery in the market more efficient, and is a trade-off we are willing to make to ensure that participants need only broadcast market actions rather than intent.