Came across this in my daily readings ... new to me ... could have been had
many times in the past - in my trusting days ...
An unethical practice by market makers, they trade an equity in advance to information by their analysis dept. and before their clients have been given the information.
One example of front running are analysts and brokers that buy up shares in company XYZ just before the brokerage is about to recommended the stock as a strong buy.
Another example is a broker who buy's himself 200 shares in stock XYZ just before his brokerage was planning to buy a large block of 400,000 shares."
A posible scenario ...
Client instruct broker to sell @100 when the market is @100.
Broker sell @100 but waits ...
Either price goes up to 101, broker will count the earlier sell @100 as sell
by the client. Net result broker 0, client 0.
Or, if price goes down to 99, broker will buy @99 (closing his trade) and
count this as the sell from the client. Net result broker +1, client -1.
No risk to broker either way.