executing orders on a security for its own account
while taking advantage of advance knowledge of pending orders from its customers.
When orders previously submitted by its customers
will predictably affect the price of the security,
purchasing first for its own account gives the broker an unfair advantage,
since it can expect to close out its position at a profit based on the new price level.
The front running broker either buys for his own account
...before filling customer buy orders that drive up the price...
Allegations of front running occasionally arise in stock and commodity exchanges,
in scandals concerning floor brokers and exchange specialists.
...Khan & Lu (2008: 1) define front running
as "trading by some parties in advance of large trades by other parties,
in anticipation of profiting from the price movement that follows the large trade".
While front-running is illegal when a broker uses private information about a client's pending order,
in principle it is not illegal if it is based on public information.
In his book Trading & Exchanges,
Larry Harris outlines several other related types of trading.
Though all these types of trading may not be strictly illegal,
he terms them "parasitic".
"Front running" is sometimes used informally for a broker's tactics
related to trading on proprietary information before its clients have been given the information."
Domain name front running
Domain name front running is the practice whereby a domain name registrar
uses insider information to register domains for the purpose of re-selling them
or earning revenue via ads placed on the domain's landing page.
By registering the domains,
the registrar locks out other potential registrars from selling the domain to a customer.
...The term was created by domain investor and retired stockbroker Daniel Stager
who likened the practice to front running,
when a stockbroker illegally puts their own financial interests above that of their clients.