“Flash” Order technology, Nasdaq introduces it, to benefit high frequency traders AT THE EXPENSE OF INVESTORS
The SEC has weighed in questioning the legality of these orders (http://www.tradersmagazine.com/news/-103830-1.html), yet Nasdaq and our self regulating market centers continue to implement them. What are these order types?
Imagine you are a mutual fund who wants to enter an order to buy 500,000 shares of JNPR at 24.30 (only showing 500 shares of it to the world, mind you). 10,000 shares are OFFERED there in ARCA, and your intention is to take whatever is offered (you assume at least the 10,000 shares) and bid for your 490,000 share balance, again showing 500 shares only. Now imagine you enter the order in NSDQ. What do you think of NSDQ scraping its own book, holding up your order for 1/2 a second (rules say they have a full second to route out to satisfy regulations), and “flash” it to the world, and NSDQ’s largest customers (high frequency traders). These high frequency traders front run and take ARCA ahead of you, and BID ahead of you at your limit.
NICE!!!! At best, you get some of the stock offered at your limit (not all) and the high frequency guys bid ahead of you (getting rebated and incented by NSDQ to do exactly that). At worst you dont get your offered stock at all (you were just front run) and bid ahead of. So much for leakage. So much for order transparency. So much for fair markets.
I guess the SEC and FINRA and the regulators in general have been busy with all the globals stuff to watch Bernie and this. They won’t notice how their own REG NMS rules are being spat on. Hurray for the common man!