Buzzword: Front running

Marketplace Staff Feb 9, 2007

An unfair advantage brings us this week’s Marketplace Money buzzword: front running.

Front running is a kind of insider trading. Say you’re a Wall Street broker. A client tells you to make a very big trade. So big, it could effect the price of other stocks. So: you make some trades for yourself before completing your client’s trade. And reap the rewards.

The Securities and Exchange Commission calls that cheating! This week, they said they’re investigating several banks that may have helped hedge fund clients front run. If the allegations are true, the banks could end up in front of . . . a judge.

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