[codexon]

Flash trading: Joe wants to buy shares at price 10 or better. You are Goldman Sachs, you see Joe's order before anyone else.

You see shares costing 9.80, so you buy it up quickly, and sell it to Joe for 10, making a profit of 0.20 per share while driving up prices for Joe.

That is front running.

[yummyfajitas]

You apparently do not know what a flash trade is.

A flash trade gives Goldman the opportunity to fill Joe's order at the NBBO price before it is routed to another exchange. It does absolutely nothing else. The person receiving the flash is even prohibited from making offers on that security on other exchanges for a few milliseconds after receiving the flash.

This gives Goldman an advantage over other high frequency traders since it gives Goldman a higher fill rate, which is definitely unfair.

[codexon]

Apparently you don't. The allure behind flash trading is to avoid rule 602 in regulation NMS: you are not required to fill the order at the NBBO. You can use dark pools to fill orders.

[yummyfajitas]

Yes, but the order would not be filled at the dark pool price without the flash trade. Joe's order would be filled at the NBBO on another exchange (NOT the darkpool) and Joe would pay an extra routing fee.

If Joe wanted to fill the order himself on a darkpool, he would not have asked the exchange to flash his order.