http://www.themistra...reet_12-17-08.pdf
Exec summary: Superfast servers located right in the exchanges give brokers insight into what price institutional investors are willing to buy or sell, then buy or sell a penny above/below that price and pocket the difference.
Or, just buy/sell at the exact same price and the exchange gives them a half-cent per share commission for generating trade data. Trade data that they then sell to Bloomberg for the institutional investors.
Found in a link from here: http://www.frontline...pdf/mwo071009.pdf