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Zorluk: KolayProhibited Market Manipulation and Fraudulent Practices

A registered representative receives a large institutional customer order to buy 500,000 shares of common stock. Before entering the customer's trade into the system, the representative purchases 1,000 shares of the same stock in their personal trading account to profit from the expected price movement. Which of the following prohibited practices has the representative committed?

  1. Front-runningCevap
  2. B
    Wash trading
  3. C
    Acting in a principal dealer capacity
  4. D
    Exercising SRO regulatory authority

Cevap

The representative committed front-running by taking personal advantage of advance knowledge of a pending customer block order.
Front-running is the prohibited practice of taking a position in a security, option, or futures contract based on nonpublic advance knowledge of an impending block trade in the same security. The representative placed a personal order to profit from the price rise expected when the customer's 500,000-share order hit the market.

Adım Adım Çözüm

1
Analyze the representative's trading sequence
The representative placed a personal buy order prior to submitting a known, incoming institutional customer block order.
Block orders typically cause market price shifts, creating an unfair opportunity to profit if personal trades are executed first.
2
Match the conduct with FINRA prohibited activity rules
Trading ahead of a customer's pending block order is defined as front-running.
Industry rules strictly prohibit representatives from placing personal or firm orders ahead of unexecuted customer orders for the same security.

Anahtar Kavram

Front-running
Tahmini Süre:1m 0s
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Konular

Prohibited Market Manipulation and Fraudulent Practices