According to Reuters, at issue are buy and sell orders that the Nasdaq Stock Market and BATS Exchange began "flashing" early last month to market members, including the big broker-dealers, before they are routed elsewhere to all participants. The flashes -- which last for fractions of a second -- allow computer programs to respond.
Although delaying information for only fractions of a second may seem like an absurdly short amount of time to a retail investor, high frequency pros can make their move in just 0.03 seconds!
And “although anyone can gain access to flash orders by paying a fee, they are useful only to traders who have computers powerful enough to act on the data within milliseconds,” explains the New York Times .
"In recent years, some of the largest financial companies, including Goldman Sachs, have earned enormous profits with such computers, which are very expensive and often housed right next to the machines that power the marketplaces themselves," says the Times.
It’s also worth noting that none of the exchanges went along willingly with flash orders, explains Sandler O’Neil analyst Richard Repetto on Fast Money. In fact, the New York Stock Exchange always stood against it.
Although there's nothing illegal about these "flashes" it does raise the issue about making the playing field level for everyone. What do you think? We want to know!
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Trader disclosure: On Aug 4th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (MSFT), (RIMM), (JPM), (MS), (ABT), (MCD), (AMZN); Terranova Works For (VRTS); Terranova Is Short (TM), (WFC), (WYNN), (F); Finerman Owns (RIG); Finerman's Firm Owns (MSFT), (NOK), (PBR), (RIG), (PDE), (TBT), (WMT); Finerman's Firm And Finerman Own (BAC) Preferred Shares; Finerman's Firm And Finerman Own (WFC) Preferred Shares; Finermnan's Firm Is Long (WFMI) Puts; Finerman's Firm Is Short (WFC), (USO), (IJR), (IYR), (IWM), (MDY), (SPY); Finerman's Firm Owns (CTX); Grasso Owns (BAC), (BA), (COST), (CSCO), (FAZ), (OXY), (V), (WMT), (XLF); Grasso's Company Owns (ABT), (GERN), (MSFT), (NWS.a), (NYX), (PDE), (RDC), (ROK), (XOM), (SDS); Grasso's Company is Short (QQQQ), (CL); Grasso Owns (CSCO); Najarian Owns (AET); Najarian Owns (BX) Call Spread; Najarian Owns (BUCY) & (BUCY) Call Spread; Najarian Owns (INTC) Call Spread; Najarian Owns (JPM) & (JPM) Call Spread; Najarian Owns (MS) & Short (MS) Calls ; Najarian Owns (MSFT) & Short (MSFT) Calls; Najarian Owns (PALM) Call Spread; Najarian Owns (V) & Short (V) Calls; Najarian Owns (YHOO) Call Spread; Najarian Owns (TCK) Calls
For Rich Repetto
Sandler O'Neill Expects To Receive compensation from (ICE)
Sandler O'Neill Expects To Receive Compensation from (NDAQ)
Sandler O'Neill Expects To Make A Market In Shares of (NDAQ)
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