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What are the ethical (lol) rules against front-running your own customers if you're a market-maker? How could your customers even find out? What happens when th
by reverend_gonzo 13y ago
What are the ethical (lol) rules against front-running your own customers if you're a market-maker? How could your customers even find out? What happens when the proprietary information is that a customer has just placed a large trade, and you drive up the price before it even hits the market? How is this fundamentally different than the commission these firms already charge?
Market makers are generally proprietary firms that trade their own money, and don't have customers.
Brokerages (ie: Scottrade) have customers and it illegal for them to front run their customers.
- exelius 13y agoI'm not thinking retail brokerages -- I'm thinking investment banks like Goldman. Often the big i-banks have both prop trading operations and the ability to fill large orders for institutional clients (e.g. a pension fund looking to buy $1 billion of Apple stock).
- reverend_gonzo 13y agoFor them, they have a fiduciary duty to their clients to act in their customers' best interest. So, if their clients asks to purchase, for example 100,000 shares of AAPL, it would be illegal for them to first drive up the price.