Flash trading is an automatic computerized trading method allowed on some stock exchanges. The method involves third party computer systems viewing orders coming in to the stock exchange for a very short time, typically 30 milliseconds, in this time the system can perform statistical analysis of the market and do automated trading ahead of the public.
The exchanges provides this service for a fee. Proponents of Flash trading arguee that it adds liqudity to the market, but critics call this a form of insider trading or front running.
High frequency trading firms now account for 73% of all U.S. equity trades, although they represent only 2% of the approximately 20,000 firms in operation.