Some fast-moving computer-driven investment firms are getting an edge by trading on market data before it gets to other investors, according to market players and researchers who have studied the trading.

The firms gain that advantage by buying data from stock exchanges and feeding it into supercomputers that calculate stock prices a fraction of a second before most other investors see the numbers. That lets these traders shave pennies per share from trades, which when multiplied by thousands of trades can earn the firms big profits.

Critics call the practice the modern day equivalent of looking at share prices listed in tomorrow's newspaper stock tables today.

'It is a rigged game,' Sal Arnuk, co-founder of brokerage firm Themis Trading, said Wednesday at a Securities and Exchange Commission roundtable discussion in Washington, D.C., referring to the trading activity, which some call 'latency arbitrage.'

While legal, the practice pushes the envelope of what is fair, critics say, and raises questions about the advantages some fast-moving traders are gaining in the market.

The SEC roundtable convened executives from trading centers and firms across Wall Street as the agency continues to probe high-frequency trading and the growth of dark pools, trading venues where trades take place away from the main exchanges.

High-frequency trading has come under greater scrutiny since the May 6 'flash crash,' when some high-frequency firms along with a number of other active traders withdrew from the market, arguably exacerbating the stocks' swift downdraft that day.

High-speed trading, now estimated to account for about two-thirds of U.S. stock market volume, takes many forms, some entirely proper. Defenders say it reduces trading costs for all investors by adding volume to the market. Latency arbitrage is a type of trading that relies on ultrahigh speeds; it's not clear which firms engage in it or how pervasive it is.

Some firms pay tens of thousands of dollars a year to individual exchanges for premiumaccess to their price feeds, industry players and exchanges say.

The SEC, in a broad review of market structure earlier this year, said information from trading-center data feeds 'can reach end-users faster than the consolidated data feeds.'

The latency arbitrage trade aims to game the so-called national best bid and offer price on a stock, which sets the price most investors use to trade.

The ability to estimate price moves ahead of the national best bid and offer price, which is consolidated electronically from exchanges, can give traders an advantage of about 100 to 200 milliseconds over investors who use standard market tools, according to a November 2009 report on such trading activities by Jefferies & Co.

An advanced look at exchange data and order flow can provide firms 'the ability to forecast future prices' and 'make adjustments to their orders in the market or send new orders which are based on this information,' the report found.

Scott Patterson

• investment [in´vestmənt] n.投资；(时间等)投入 (初中英语单词)
• advantage [əd´vɑ:ntidʒ] n.优势；利益 (初中英语单词)
• wednesday [´wenzdi] n.星期三 (初中英语单词)
• discussion [di´skʌʃən] n.讨论；辩论 (初中英语单词)
• envelope [´envələup] n.信封，封皮 (初中英语单词)
• agency [´eidʒənsi] n.代理商；机构；代理 (初中英语单词)
• account [ə´kaunt] vi.说明 vt.认为 n.帐目 (初中英语单词)
• volume [´vɔlju:m, ´vɑljəm] n.卷；书籍；体积；容量 (初中英语单词)
• review [ri´vju:] v.&n.复习；回顾；检查 (初中英语单词)
• structure [´strʌktʃə] n.结构，构造；组织 (初中英语单词)
• ability [ə´biliti] n.(办事)能力；才干 (初中英语单词)
• estimate [´estimət, ´estimeit] n.估计；评价 vt.估价 (初中英语单词)
• advanced [əd´vɑ:nst] a.先进的；高级的 (初中英语单词)
• studied [´stʌdid] a.故意的；有计划的 (高中英语单词)
• fraction [´frækʃən] n.小部分；一点儿 (高中英语单词)
• equivalent [i´kwivələnt] a.相等的 n.同等物 (高中英语单词)
• commission [kə´miʃən] n.委任(状) vt.委任 (高中英语单词)
• withdrew [wið´dru:] withdraw的过去式 (高中英语单词)
• access [´ækses] n.接近；通路；进入 (高中英语单词)
• so-called [´sou ´kɔ:ld] a.所谓的，号称的 (高中英语单词)
• premium [´pri:miəm] n.奖励；奖金；保险费 (英语四级单词)
• forecast [´fɔ:kɑ:st] vt.&n.预测；预报 (英语六级单词)