Scroll Top




    Front-running is when a broker or an investor joins a trade because they have foreknowledge of a large confidential deal which will impact the asset's price. Front-running is also known as forward-trading or tailgating. It can happen when stockbrokers know their firm plans to buy several shares of a particular stock and buy shares from the same stock on their own. It also occurs when an analyst or a broker buys or sells shares from their personal account before their firms buy or sell customers recommendations.

    Front-running is illegal and unethical because it leverages private information that is not publicly available. Stockbrokers and traders frequently have access to inside information concerning their firm's investment plans. Brokers and traders may use this confidential information to make investments that will be of personal benefit to them. Buying when indexes or funds reveal they will be purchasing an asset is not illegal since the information is made public.

    Understanding Front-Running

    Understand front-running better with an example. A broker receives a request from a client to purchase 50,000 Company A shares. He keeps the order from the client until he executes an order for his personal account for the same stock. Then, when he places the customer's request, share price increases due to the scale of the customer's order.

    The rise creates the broker an immediate benefit. Front-running, similar to insider trading, offers unfair profits to the broker who has confidential information that will affect the price of the asset.

    1. Companies and individuals are permitted to hold positions in assets that they recommend or discuss, but their position must be revealed at the time of recommendation or debate.
    2. Having a position is not illegal but trying to take advantage of non-public information is.
    3. A short-seller can pile up a short position and then reveal their research to the general public as to why they shorted the stock. This is not illegal because the short-seller tries to take advantage of the overall conditions, not just trying to profit from the release of their information. The latter would be a pump and dump version of short sell.

    Popular Topics

    Latest Articles

    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use


    ISO 27001

    Data Center


    SSL Certified Site

    128-bit encryption