How One Whistleblower Turned the Tables on High-Frequency Traders

A once esoteric corner of the stock market —- “order types” —- has taken center stage the past few years in the debate about the health of the market, the role of high-speed traders in it and how stock exchanges interact with clients.

A big reason for the scrutiny: Order types in many ways stand at the boundary between exchanges and their trading clients. As such, they play a crucial role in how buy and sell orders are handled and can determine whether an order is successful or not.

But few realized how complicated, and how problematic, they had become until a former high-speed trader, Haim Bodek, decided to blow the whistle to regulators in 2011.

First, a quick primer. Order types are instructions traders use to tell an exchange how a buy or sell order should be handled by the exchange, such as whether the order should be executed immediately or wait until a stock reaches a certain price level. There are hundreds of variations of order types, and many have proliferated in recent years, adding to the market’s complexity.

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