3 ms·

I'm a fairly new stock investor so these are honest questions. Actual front-running is illegal as far as I can tell, no? What is the difference between what the

• SpicyLemonZest 7y ago
  The canonical case of front-running is that your customer calls you up, says "I want to buy 100 shares", and then you go out and buy 50 shares for yourself before buying their shares. Then their purchase makes the price go up and you've made a free profit at either their or the market's expense. The canonical case of market-making is that you think "you know, I think people are going to ask me to buy 100 shares this afternoon, so I'd better buy 50 this morning to hedge". (Or "you know, I've just bought 100 shares for a customer, I'd better buy 50 for myself".) There's a core similarity here - you're buying shares based on your customers' trades - but I think it's also clear that you're not really taking advantage of anyone.