Check out this white paper written by a firm called Themis Trading, which I had never heard of until today.
Apparently super fast computers and smart programmers are coming up with new and clever ways to get an edge on the stock market.
"This [the move away from the exchanges to electronic trading] has resulted in the proliferation of a new generation of very profitable, high-speed, computerized trading firms and methods that are causing retail and institutional investors to chase artificial prices. These high frequency traders make tiny amounts of money per share, on a huge volume of small trades, taking advantage of the fact that all listed stocks are now available for electronic trading, thanks to Reg NMS and the NYSE Hybrid. Now that it has become so profitable, according to Traders Magazine, more such firms are starting up, funded by hedge funds and private equity (only $10 million to $100 million is needed), and the exchanges and ECNs are courting their business."
It is worth reading if you're in the biz.