Front Run
Front running is trading ahead of a large order — often one you have advance knowledge of — because you expect that order to move the price, and you want to profit from that move before it happens.
The classic setup involves someone in a position of trust: a broker, a fund employee, or anyone else who learns that a big buy or sell order is about to hit the market. Instead of simply executing that order for their client, they first buy (or sell) the same security for their own account, knowing the incoming large order will push the price in their favor. Once the big order goes through and the price moves, they close their own position for a quick, low-risk profit at the client's expense.
The nuance that trips people up is that not all "trading ahead of a move" is front running. Front running specifically requires acting on knowledge of a *specific, pending order* that isn't public information — that's what makes it a breach of duty rather than just a good guess. A trader who buys a stock because they correctly predict a catalyst, or who reacts to a large order the moment it becomes visible on a public order book, is not front running; they're just trading on public information or a hunch. What makes it front running is the non-public, order-specific knowledge and the fiduciary or contractual relationship that's being violated. Because of this, front running by brokers, analysts, or asset managers is prohibited by securities regulators and exchange rules, and can carry serious professional and legal consequences.
It's worth distinguishing front running from related but legal activity. Anticipating that a stock will move because of a scheduled event (like an earnings release or a known options expiration) is not front running — that's public information anyone can trade on. Front running is narrowly about exploiting knowledge of someone else's specific unexecuted order.
This term depends on a rule or threshold that changes over time, so no specific figure is quoted here. The definition frames front running as generally prohibited by securities regulators/exchange rules, but does not cite a specific rule, regulator, or penalty. A human editor should confirm the current specific regulatory basis (e.g. which FINRA/SEC rule or exchange rule applies in the relevant jurisdiction) before publishing if the page is meant to cite authority, since specific rule numbers and enforcement frameworks can change and were not verified against a current source.
Day traders should know front running both as a risk to watch for — unusual, unexplained price ticks just before a large order prints can be a sign of it — and as a line they must not cross if they ever handle client orders or see order flow before it's public.
A broker learns a client is about to place an order to buy 500,000 shares of a thinly traded stock. Before entering that order, the broker buys 2,000 shares for their own account at $10.00. The client's large order then pushes the price to $10.40. The broker sells their 2,000 shares at $10.35, pocketing about $700, while the client ends up paying a higher average price than they would have otherwise.
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