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Bright addresses internalization and payment for order flow problems in their second letter to SEC. http://www.sec.gov/comments/4-602/4602-29.pdf

Nofear, Send your concerns to the SEC, we need more voices. Our firm, Bright Trading is the only one voicing their opinions about these abuses. They are accepting comments about their roundtable discussion from Wednesday (in which some of these issues were raised). This is a perfect...

Sub-pennying happens all day, but it isn't as noticeable in liquid securities, because the spread is only one cent. (Typically, your buy order is not filled until the stock is offered at your price, but on liquid issues that is only one cent, so fills are still common on passive orders.) Are...

I agree payment for order flow is a major problem in our market. It allows firms with no client base to internalize orders (that's all the sub-penny prints you are seeing). Basically no uninformed retail order flow gets to the exchange anymore.

With regards to co-location, yes co-location is becoming more affordable, but let's be honest, the system will eventually look something like this: Room A is the VIP access, If you pay for Room A today the only thing that separates your computer from the server is a few inches of a cooling...

There is a lot we can do. Our firm, Bright Trading is the only firm standing up against these internalization abuses. As traders, we need to stand up against broker-dealer internalization, as these abusers constantly step in front of displayed limit orders by a sub-penny increment. We've had...

Exactly. Many HFT firms offer a distinct benefit to our markets in the form of added liquidity. However, there are a few firms that prey on other liquidity providers, and only add liquidity at the expense of passive limit orders. Like Jerkstore has said, technology has allowed these abuses to...

We are asking for the help of all traders. The SEC is currently accepting comments on the equity market structure. We encourage you to submit your comments and concerns with sub-pennying or any other market abuses via this online form...

Chump change adds up. http://www.defendtrading.com/cfm.v21.n1.2.pdf

It's not necessarily just market makers, it's any market participant capable of submitting a sub-penny order into a dark pool. But, you're exactly right, this is a low risk scam, for anyone with the capabilities. SEC rule 612 needs to be altered to curtail this abuse...

Many strategies that worked before, still work today. But one adaptation needs to be made to all strategies, and that is not placing passive orders. If you're placing passive limit orders, the odds are stacked against you. You'll be sub-pennied when you're right (they step ahead of your...

This is a good article to read from one of the T3Live guys: http://www.twsinvestments.com/2010/02/hft-forcing-traders-to-become-more.html I'm a trader with Bright, and we still have alot of traders doing very well, we're slowly adapting to this new HFT world. The number one adaptation you...

I think the reasoning for the high carry costs is probably two-fold. The main reason is just an excuse to charge an abnormally ridiculous rate, by saying it's hard to borrow. But really is there any justification for charging rates of 50-80%? We're not in a credit crunch anymore. Someone is...

I'm a prop trader with Bright, and we pay these fees. There's probably some exemptions at higher levels, but this information would be very hard to obtain, as it's not publicy disclosed. This is another shady area of our two-tiered market structure.

Each clearing firm has their own list of shortable stocks. So this will differ from broker to broker depending on the clearing firm. There's no rule of under $3 being hard to borrow. GS has lots of shortable stocks under $3 that are not hard to borrow, FNM for example. The carrying...

ephstrader, There has been a shifting of power to HFT algorithmic systems. Through flash orders and sub-pennying, they have the complete edge on us. I've been a Bright trader for 10 years, and our firm is struggling as well. I have launched a website to deal with these issues...

Yeah, let's reward the retail trader with .0001/share and compromise the entire NBBO. Makes alot of sense.

I agree that Flash is not the entire problem here. I am simply stating that I believe it goes on with Flash orders as well. I don't get any .0001 fills, because our orders are routed directly into exchange (not flashed). It's the retail customer that is being flashed. But, I make money by...

Propseeker, So you're trying to say that no-one is intentionally stepping in front of my bid or offer? That any prints i see .0001 in front of my order are purely coincidental?

Trom, you are exactly right. The sub-pennying is not all due to flash orders. There can be internal sub-pennying by the brokerage house, or internal matching or liquidity from other dark pools. Flash orders is only the problem, when the market order is flashed to the exchange, and the...