Flash Trading

Posted in Finance, Accounting and Economics Terms, Total Reads: 865

Definition: Flash Trading

It is a sophisticated, high speed computer technology using which some of the traders receive other market participant’s orders fraction of a second earlier than other traders in the marketplace. Thus it helps the flash traders to analysis demand and supply and recognize movements in the market before rest of the traders. This is a controversial computerized trading practice, which is allowed by a few stock exchanges.

This technology has been criticised as the critics contended that this practice creates a two tiered market. Hence a certain class of traders are at advantage and can unfairly exploit others, similar to front running. However the supporters claim that the procedure benefits all traders by creating more market liquidity and the probability of price shift. Also they claim that the share of flash trade in overall trade volume is not as high. Thus even if these orders disappear the change in trade volume among major players won’t be that big.\

Flash trading is considered akin to front running and critics believe that the practice disturbs the market transparency whereas the defendants, the stock exchanges, claim that this practice provides market liquidity.


Hence, this concludes the definition of Flash Trading along with its overview.


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