If an exchange was front-running customer orders, that would be unethical and illegal. So why is it suddenly OK for exchanges to enable front-running by third parties and profit on their actions by charging insane amounts for colocation and data services?

And - please do answer this - if what we care about is market efficiency and liquidity and there are no problems with front-running in principle, what is gained through the current division of labour except legal obfuscation? Shouldn't it be more efficient to let exchanges screw over their customers directly?