What is "front running"

alt. 1 (context finance English) The illegal practice of a stockbroker who, on receiving a large client order, places an order for his or her own account ahead of the client's, knowing that when the client's order is placed it will move the market and create a profit for the broker. 2 (context finance English) The illegal practice of placing orders for a security on one's own account in advance of promoting or recommending it. 3 (context business English) Any practice of buying something the value of which is about to increase due to a future purchase by another, especially where the knowledge derives from a fiduciary relationship. n. 1 (context finance English) The illegal practice of a stockbroker who, on receiving a large client order, places an order for his or her own account ahead of the client's, knowing that when the client's order is placed it will move the market and create a profit for the broker. 2 (context finance English) The illegal practice of placing orders for a security on one's own account in advance of promoting or recommending it. 3 (context business English) Any practice of buying something the value of which is about to increase due to a future purchase by another, especially where the knowledge derives from a fiduciary relationship.

Front running is the unethical practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers. The front running broker 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 considered unethical since the broker is making a profit at the direct expense of its own customers.

In 2003, several hedge fund and mutual fund companies became embroiled in an illegal late trading scandal made public by a complaint against Bank of America brought by New York Attorney General Eliot Spitzer. A resulting U.S. Securities and Exchange Commission investigation into allegations of front-running activity implicated Edward D. Jones & Co., Inc., Goldman Sachs, Morgan Stanley, Strong Mutual Funds, Putnam Investments, Invesco, and Prudential Securities.

Following interviews in 2012 and 2013, the FBI said front running had resulted in profits of $50 million to $100 million for the bank. FBI suspects front running of Fannie, Freddie in swaps market when Wall Street traders may be manipulating a key derivatives market and front running Fannie Mae and Freddie Mac.