[div class="text-html" lang="x-western"][font face="Verdana"]One complaint made of the modern stock market is that it is concerned too much on the short term. A second is a long time in cash-equities trading. Four or five years ago, trading firms started to talk of trading speeds in terms of milliseconds. But in recent weeks trading geeks have started to talk about
picoseconds, in what is a truly mind-boggling concept: a picosecond is one trillionth of a second. (Put another way, a picosecond is to one second what one second is to 31,700 years.)
But this is not just about trading fast.
They are actually trading ahead of trade execution. (Think about
that for a moment...)
"Flash trading" is a practice in which some equity exchanges hold orders to buy and sell shares for a split second before making that information public (available to other exchanges). The exchanges' customers can view these prices
ahead of other traders for a fee. High-speed computer software can take advantage of that brief period between when an order is placed and when it's executed to allow those members to potentially get better prices and profits by slipping in and making the trade themselves.
[a class="txt-link-freetext" href="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZwoslIGa5JQ"]http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZwoslIGa5JQ[/a]
[a class="txt-link-freetext" href="http://www.marketswiki.com/mwiki/Flash_trade"]http://www.marketswiki.com/mwiki/Flash_trade[/a]
Now, the time window is about 50-300ms that the orders to be executed are posted and the automated systems can intervene. Basically, if you have orders like following coming in within 200ms (1/5 of a second),
PUT 1000@31
PUT 500@30
PUT [a class="txt-link-abbreviated" href="mailto:
[email protected]"]
[email protected][/a]
CALL 1000@market
CALL [a class="txt-link-abbreviated" href="mailto:
[email protected]"]
[email protected][/a]
the flash orders will come in, buy the two sell orders and sell it @ 31 to the market order and you end up with,
PUT 1000@31
CALL [a class="txt-link-abbreviated" href="mailto:
[email protected]"]
[email protected][/a]
This effectively stole
$950 from the market order. But then they will pay 2x the trade fees to the exchange to split in their trades ahead of the others.
This isn't fair trading, this is simply going right in the middle between transactions and milking them for the most they can.
It is not trading - it is stealing.[/font] [/div]
