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When a large buy order comes in price rises. Front running would be buying before that large order can execute, and selling immediately after it completed and m

When a large buy order comes in price rises. Front running would be buying before that large order can execute, and selling immediately after it completed and moved market price up.

lrm242 12y ago
Wrong. Front running has a very specific definition and requires a broker to be acting on behalf of a client. 1. Broker takes client order. 2. broker trades his own account first (with knowledge of client order) 3. Broker executes client order. If you don't have clients you can't be front running. It is black and white and as simple as that.
- Retric 12y ago
  Wrong It's also Front running and illegal to pay a Broker for prior knowledge in front of their clients trades. Also, the term may apply to using insider knowledge. Khan & Lu (2008: 1) define front running as "trading by some parties in advance of large trades by other parties, in anticipation of profiting from the price movement that follows the large trade". They find evidence consistent with front-running through short sales ahead of large stock sales by CEOs on the New York Stock Exchange. http://en.wikipedia.org/wiki/Front_running http://en.wikipedia.org/wiki/Front_running " "Front running" is sometimes used informally for a broker's tactics related to trading on proprietary information before its clients have been given the information. For example, analysts and brokers who buy shares in a company just before the brokerage firm is about to recommend the stock as a strong buy, are practising this type of "front running". Brokers have been convicted of securities laws violations in the United States for such behavior. "
  - tedunangst 12y ago
    Calling all insider trading "front running" does nothing but muddy the waters.
    - Retric 12y ago
      Not all insider information, just insider information about large pending trades.
RickHull 12y ago
This is incoherent for a single order. When the first order hits the books, a subsequent order has no opportunity to execute before the first except at a price disadvantage. Front-running typically involves an agent (i.e. a broker) executing on behalf of the principal, where the agent makes his own trade first, moving the market against the principal, and only then executing the principal's trade. Notice: two orders. This is not a problem when the principal has an exchange seat and may execute directly. Where firms are performing multiple-exchange arbitrage, and the principal splits a large order into several for execution across multiple exchanges, there is now an opportunity for something like front-running: the arbitrage firm can detect the principal's intent from the first order to hit the first exchange, and then try to move the market profitably (against the principal) on the other exchanges before the correlated orders can execute. While somewhat analagous, this activity should not be referred to as front-running.

When a large buy order comes in price rises. Front running would be buying before that large order can execute, and selling immediately after it completed and moved market price up.

lrm242 12y ago

Wrong. Front running has a very specific definition and requires a broker to be acting on behalf of a client. 1. Broker takes client order. 2. broker trades his own account first (with knowledge of client order) 3. Broker executes client order. If you don't have clients you can't be front running. It is black and white and as simple as that.

Retric 12y ago
Wrong It's also Front running and illegal to pay a Broker for prior knowledge in front of their clients trades. Also, the term may apply to using insider knowledge. Khan & Lu (2008: 1) define front running as "trading by some parties in advance of large trades by other parties, in anticipation of profiting from the price movement that follows the large trade". They find evidence consistent with front-running through short sales ahead of large stock sales by CEOs on the New York Stock Exchange. http://en.wikipedia.org/wiki/Front_running http://en.wikipedia.org/wiki/Front_running " "Front running" is sometimes used informally for a broker's tactics related to trading on proprietary information before its clients have been given the information. For example, analysts and brokers who buy shares in a company just before the brokerage firm is about to recommend the stock as a strong buy, are practising this type of "front running". Brokers have been convicted of securities laws violations in the United States for such behavior. "
- tedunangst 12y ago
  Calling all insider trading "front running" does nothing but muddy the waters.
  - Retric 12y ago
    Not all insider information, just insider information about large pending trades.

RickHull 12y ago

This is incoherent for a single order. When the first order hits the books, a subsequent order has no opportunity to execute before the first except at a price disadvantage. Front-running typically involves an agent (i.e. a broker) executing on behalf of the principal, where the agent makes his own trade first, moving the market against the principal, and only then executing the principal's trade. Notice: two orders. This is not a problem when the principal has an exchange seat and may execute directly. Where firms are performing multiple-exchange arbitrage, and the principal splits a large order into several for execution across multiple exchanges, there is now an opportunity for something like front-running: the arbitrage firm can detect the principal's intent from the first order to hit the first exchange, and then try to move the market profitably (against the principal) on the other exchanges before the correlated orders can execute. While somewhat analagous, this activity should not be referred to as front-running.