Longer answer from Matt Levine at Bloomberg News.
In 2009 and 2010, according to the SEC order, "ITG explored initiatives to increase diversification and revenues," and someone came up with a very clever initiative. ITG gets all these customer orders to buy stock, see. So why not -- just hear me out here -- why not look at the customers' orders, buy the stock ahead of them, and then sell it immediately to the customers at a higher price? That's a pretty good risk-free profit.You know, I remember when Bush II wanted to take all your Social Security money and give it to people like ITG. I don't recall his mentioning anything about front-running, dark pools and whatnot.
Some people think that free markets do not really operate to give everybody a fair shake, and they are right. Regulators even allow for special categories of players who known to enjoy insurmountable advantages.
Remember that the next time some big-time lawbreaker -- I am looking at you, Jamie Dimon -- tells Congress that more regulation would be a bad thing.