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Bernie was a marketmaker for probably most NASDAQ stocks. His traders would make a market in the stock so when you would place your online trade, they would offer to sell you say 100 shares of Apple at $55.12. This is all in real time with thousands of trades often per minute.

5 years ago - His market making firm might buy your 100 shares at say 55 1/4 and quickly sell it for 55 3/8s. This is the spread and this is how his firm made money.

5 years ago decimalization came in and shares were quote in pennies like $55.03 versus $55 1/16. The spread shrunk a LOT and so did profitability.

This is when I think Bernie went bad unless he already was bad.

Ok frontrunning. Bernie’s traders could have seen 1,000 shares of Apple being bought at $55 1/4 and they jump in front and buy at $55 1/8. They could jump in the from of the line and buy or sell to make their clients money while SCREWING you and I placing trades online or anybody making a trade - could be Smith Barney. The practice is illegal. Bernie’s firm as marketmaker could see the “order flow” which is like getting a 20 second advanced video on a football game to allow you to adjust your team on the field. So on every transaction/trade Bernie could pick up an extra $100 or $1000 bucks on each trade.

His investing supposedly involved lots of trades. So if he was front running his clients might make $200 on a trade and you lost $200 on your online trade you made in Apple. Multiply this by say 10,000 trades a day and it adds up.

So many of his clients thought Bernie had this edge. A lot knew his edge was cheating. I think this is how it worked up to 5 years ago before prices went to pennies and the spreads vanished. He may have gone dirty about 5 years ago. He may have still been making say 5 to 6% a year on his strategy for the clients and paying out 11 to 15%. This still worked because most of his clients left their money in. In addition, more money was still coming in which is the key to a Ponzi scheme.