Front Running

The practice of front running denoted in stock market trading taking advantage of confidential knowledge about the trading strategy of the client (before the implementation of the ordered transaction ) by the representatives of the executing institution for its own benefit.

For example, a large buy order to close markets to a disproportionate price increase in the value concerned. This knowledge can be a stockbroker before buying such a large purchase order first for the proprietary account values ​​in order to benefit from the price increase in the following order ( and thus increases already the price to the detriment of the client ). If the private contract at the same time issued, one speaks of the special case of parallel running.

Legal Analysis

This is an illegal in most countries commercial practice and is in Germany a violation of the conduct of business rules of the WpHG is, more precisely of § 31 Section 1 No. 2 ( " avoidance of conflicts of interest " ) and may in accordance with § 39 para 2 No. 15 be taken in conjunction with paragraph 4 by a fine of up to 50,000 euros. In Switzerland, the front running violates the lit in Article 11, paragraph 1. c Exchange Act fixed duty of loyalty of the securities dealer. In the 2004 revised definition clarifies that the performing of own orders by utilizing the knowledge already placed customer orders (so-called front-running ) is the recycling of insider information, and therefore translated at the criminal act of insider trading under § § 12 to 14 of the WpHG.

Other forms of market manipulation

• Insider Trading
• Churning
• Scalping

• Trading
• Securities Law
• Financial Strategy
• Economic crime
• Special penology