This article is about the financial practice. For the practice as applied to domain names, see domain name front running.
Front running, also known as tailgating, is the practice of entering into an equity (stock) trade, option, futures contract, derivative, or security-based swap to capitalize on advance, nonpublic knowledge of a large ("block") pending transaction that will influence the price of the underlying security.[1] In essence, it means the practice of engaging in a personal or proprietary securities transaction in advance of a transaction in the same security for a client's account.[2] Front running is considered a form of market manipulation in many markets.[3] Cases typically involve individual brokers or brokerage firms trading stock in and out of undisclosed, unmonitored accounts of relatives or confederates.[4] Institutional and individual investors may also commit a front running violation when they are privy to inside information. A front running firm either buys for its own account before filling customer buy orders that drive up the price, or sells for its own account before filling customer sell orders that drive down the price. Front running is prohibited since the front-runner profits come from nonpublic information, at the expense of its own customers, the block trade, or the public market.[5][6]
In 2003, several hedge fund and mutual fund companies became embroiled in an illegal late trading scandal made public by a complaint against Bank of America brought by New York Attorney General Eliot Spitzer. A resulting U.S. Securities and Exchange Commission investigation into allegations of front-running activity implicated Edward D. Jones & Co., Inc., Goldman Sachs, Morgan Stanley, Strong Mutual Funds, Putnam Investments, Invesco, and Prudential Securities.[7]
Following interviews in 2012 and 2013, the FBI said front running had resulted in profits of $50 million to $100 million for the bank.
Wall Street traders may have manipulated a key derivatives market by front running Fannie Mae and Freddie Mac.[8]
The terms originate from the era when stock market trades were executed via paper carried by hand between trading desks.[9] The routine business of hand-carrying client orders between desks would normally proceed at a walking pace, but a broker could literally run in front of the walking traffic to reach the desk and execute his own personal account order immediately before a large client order. Likewise, a broker could tail behind the person carrying a large client order to be the first to execute immediately after. Such actions amount to a type of insider trading, since they involve non-public knowledge of upcoming trades, and the broker privately exploits this information by controlling the sequence of those trades to favor a personal position.[10]
^Nasdaq. "Glossary: Front running".
^"Front Running Definition: 124 Samples".
^The New Market Manipulation, 66 Emory Law Journal 1253 (2017)
^United States Securities and Exchange Commission. "SEC Charges Dallas-Based Trader With Front Running".
^Financial Industry Regulatory Authority. "FINRA Manual Online, Rule 5270: Front Running of Block Transactions".
^"Front-running; an Unethical Behavior" (PDF). www.cmic.sec.gov.lk. Sri Lanka SEC. Retrieved 25 July 2014.
^Benjamin, Jeff (September 8, 2013). "Image Repair: Mutual funds still recovering 10 years after scandal". [Investment News].
^Reuters FBI suspects front running of Fannie, Freddie in swaps market
^Edwin Lefèvre (1923). Reminiscences of a Stock Operator.
^Moyer, Liz (20 July 2016). "How Traders Use Front-Running to Profit From Client Orders". The New York Times.
Frontrunning, also known as tailgating, is the practice of entering into an equity (stock) trade, option, futures contract, derivative, or security-based...
Domain name frontrunning is the practice whereby a domain name registrar uses insider information to register domains for the purpose of re-selling them...
Running is a method of terrestrial locomotion by which humans and other animals move rapidly on foot. Running is a gait with an aerial phase in which...
create potential conflicts of interest such as insider trading and frontrunning. Proprietary traders may use a variety of strategies such as index arbitrage...
is facing rather than one's front. It is classed as a retro movement, the reverse of a normal movement. Backward running is a less-natural motion but...
Nobunaga, defeated Imagawa Yoshimoto and established Oda as one of the front-running warlords in the Sengoku period. In 1560, Imagawa Yoshimoto, a powerful...
the frontrunning cars pitted, with Dixon, Sato, and Andretti emerging first. Cars that had pitted during the first caution cycled to the front of the...
numerous reliability problems, they had gradually developed into a front-running team by the end of the season. Defending Constructors' Champion Benetton...
searched on their website for five days, a practice known as domain name frontrunning. Domain tasting has been used for the purposes of spam. The limited...
problems of liquidity pool DEXes are market price impact, slippage, and frontrunning. Price impact occurs because of the AMM (Automated Market Makers) nature...
off-season, banning the various electronic devices that had been used by the frontrunning cars during the preceding two seasons. The FW16 was a passive evolution...
bit. In the Preakness Stakes on May 18, Bold Ruler responded with a front-running victory, with Iron Liege two lengths back in second. Arcaro had let...
starting line, and there are no horses in front of them. Due to this number 6 and number 7 are known as "running tracks" at volt starting. Horses 8, 9, 10...
figures: Madoff was either running a Ponzi scheme (by paying established clients with newer clients' money) or frontrunning (buying stock for his own...
encompasses a wide range of other actions, including insider trading, frontrunning and other illegal acts on the trading floor of a stock or commodity...
A daytime running lamp (DRL, also daytime running light) is an automotive lighting and bicycle lighting device on the front of a roadgoing motor vehicle...
crisis in Greece (the National Schism). Eventually, a stable front was established, running from the Albanian Adriatic coast to the Struma River, pitting...
the street', or correbous 'bull-runner') is an event that involves running in front of a small group of bulls, typically six but sometimes ten or more...
1 April 2012, accessed 1 April 2012. Wood, Grey (27 March 2010). "Front-running Gloria De Campeao lifts Dubai World Cup by a nose". The Guardian. Retrieved...
scud running is a practice in which pilots lower their altitude to avoid clouds or instrument meteorological conditions (IMC). The goal of scud running is...
Global Information