One of the primary strategies I used as a day trader about 10 years ago is what this article describes as front-running (it is not front-running, because front-

One of the primary strategies I used as a day trader about 10 years ago is what this article describes as front-running (it is not front-running, because front-running is also illegal). While the terminology may have changed since I was trading, the way it works is this. When a large market order is placed with the exchange, the specialist (NYSE) would not have enough inventory to fill the entire order. What they would do is go up the book and start combining higher limit orders to fill the volume. He would also partially fill it with his own shares. This was how the specialist made a lot of their money (I imagine) because it allowed them to fill orders outside the market rate. What we would do as day traders is as soon as we saw a large order like this occur, we'd start placing orders outside the market rate on the other side, hoping to get filled when the specialist combines the whole trade at one price. Once that happens, we can then sell that back to a market maker (at the market rate) or wait until the price moves back. A few years after I stopped, the NYSE moved away from a specialist system (NASDAQ was never on one). I haven't followed the state of affairs since. I imagine the same thing still happens now, but only you have to be much much faster to play the game with the hybrid/computer market makers. source: had my series 7 about 10 years ago