frontrunning

frontrunning

정의: 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. In essence, it means the use of knowledge of an impending trade to engage in a personal or proprietary securities transaction in advance of that trade. Front running is considered a form of market manipulation in many markets. Cases typically involve individual brokers or brokerage firms trading stock in and out of undisclosed, unmonitored accounts of relatives or confederates. Institutional and individual investors may also commit a front running violation when they are privy to inside information. For example, unscrupulous employees with access to their firm's order management system may engage in front running after observing consistent stock price movements in response to the firm's largest trades. To hide the scheme, the employees typically feed information about the victimized firm's upcoming orders to a third-party who places earlier orders for the same securities with different brokers. 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. In a large scheme the front running orders may approach or even exceed the size of the victimized firm's orders pushing the price away from the firm's target price before it has placed its first order.