From the articles: "Front running is the illegal practice of a stock broker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers."
"Flash trading is [when] certain customers are allowed to see incoming orders [30 milliseconds earlier] than general market participants, ... in exchange for a fee. ... Traders ... can conduct rapid statistical analysis of the changing market state and trade ahead of the public market."
So this is not front running, there are no brokers involved for one, and the trades in question already occurred. However if NYSE takes X milliseconds to execute a trade and BATS can fill my order in Y < X - statistical analysis lag time I can get my order filled before the NYSE guy. As far as I know doing the above is not front running or illegal but it is not necessarily full of fairness. So unless NYSE only gives flash traders a peek at completed orders rather than initiated orders the above could occur. It doesn't appear that this is the case:
"Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay."
"Flash trading is [when] certain customers are allowed to see incoming orders [30 milliseconds earlier] than general market participants, ... in exchange for a fee. ... Traders ... can conduct rapid statistical analysis of the changing market state and trade ahead of the public market."
So this is not front running, there are no brokers involved for one, and the trades in question already occurred. However if NYSE takes X milliseconds to execute a trade and BATS can fill my order in Y < X - statistical analysis lag time I can get my order filled before the NYSE guy. As far as I know doing the above is not front running or illegal but it is not necessarily full of fairness. So unless NYSE only gives flash traders a peek at completed orders rather than initiated orders the above could occur. It doesn't appear that this is the case:
"Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay."
http://www.nytimes.com/2009/07/24/business/24trading.html