Competed with current in red setting (5)
I believe the answer is:
'competed' is the definition.
(racing is a kind of competing)
'in red setting' is the wordplay.
'in' means one lot of letters goes inside another.
'setting' becomes 'ac' (I can't justify this - if you can you should believe this answer much more).
'red' enclosing 'ac' is 'RACED'.
'with current' acts as a link.
Can you help me to learn more?
(Other definitions for raced that I've seen before include "Ran fast", "Dashed", "Rushed", "Ran competitively", "Went fast".)