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Front-running

Trading ahead of a customer or client order, or of information about it, to profit from the price impact that order is expected to cause.

The classic form is a broker who receives a large customer buy order and buys for the firm or a personal account first. Variants include trading ahead of a research publication, ahead of an index rebalance the firm arranged, or ahead of a block the desk is shopping.

The duty breached is to the client, so this is charged as fraud and as a violation of firm conduct rules. Surveillance now reconstructs sequences from the consolidated-audit-trail, which makes the timing evidence unusually clean.

In crypto the analogous behaviour by block builders and searchers is often described as sandwiching and sits largely outside securities law, which is a difference in regulatory reach rather than in economics.

Related: best-execution, consolidated-audit-trail, insider-trading, churning, chief-compliance-officer

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