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Definition

Front-running is a practice where a trader executes orders on a security for their own account while taking advantage of advance knowledge of pending orders from other clients. This often occurs in markets where information asymmetry exists, allowing those with insider knowledge to profit at the expense of others.

Why it matters

• It undermines market integrity.
• It can lead to increased costs for investors.
• It creates an uneven playing field in trading environments.
• It may discourage participation from retail investors.

Risks & Pitfalls

• Potential legal repercussions for traders engaging in front-running.
• Damage to reputation for firms involved in unethical practices.
• Increased regulatory scrutiny on trading activities.

Examples

No specific examples provided.

Related

No related tokens, chains, or terms available.