how much front running is going on

Discussion in 'Order Execution' started by burnin, Jan 5, 2004.

  1. burnin


    with dealers and their cronies who do the front running

    say....... a rep at a big house gets a big order and tells his buddy who is a big day trader there is a bid coming....etc....etc

    I bet its RAMPANT and somone needs to clamp down
  2. JT47319


    Hell, front running happens on the floor.

    They see a big house coming down on the floor with an order and then they'll start buying in order to sell to the commercial. Sound strategy.
  3. Once it all goes electronic - not too far away- this will stop.
  4. this phenominon (did I spell that right?) exists in nature, hence in the markets, and in human conduct....

    observe the ocean swells before/after a storm, what happens to the tide level?

    observe the effect of soda, milk, orange juice, martini(s) in a glass when a vacuum relocates the volume of liquids (straw being used)...

    observe the effect of the small traders gathering at a post because they know the reputation of a large trader entering the CME pits on the level/rung that the large traders stand on....

    a) all the small and medium sized locals and commercials trade in front so as to:

    a1) directly profit from being where the action is....

    a2) profitably accumulate a position large enough to sell into the anticipated change in demand due to the re-appearance of the large trader

    a3) earn a riskless profit from instantaneous buy/selling or selling/buying into the anticipated demand due to the re-appearance of the large trader

    what you're fussing about is how efficient markets actually work....

    the trick is to position yourself to profit from being there
  5. It is completely LEGAL to run in front of a commodity order if you purchase a contract month other than the one being purchased or sold.

    ie.) Broker XYZ on the NYMEX has a 1500 lot order to purchase Feb. Crude. Local ABC "smells" the size and starts "lifting" every offer in March Crude. Totally legal.

  6. In currencies I believe front-running is expected part of the game; Bank ABC facilitates $3 billion dollar trade, slips in extra 100MM order along with it and profits from the momentum -- the price of "credit facility" (see Market Wizards interview with Bill Lipschutz).
  7. And because stock-indexes are regulated by the CFTC and equities are regulated by the SEC, there is no accusation of "front-running" when a sales/trader of an equity-derivatives desk of some large investment bank has a portfolio manager on the phone that is about to buy/sell a few hundred million dollars worth of stock and the head derivatives trader jumps in ahead with a proprietary futures trade.


  8. You're right everything depends on definition in law hahaha:,1283,61341,00.html?tw=wn_story_related

    A provision of an intelligence spending bill will expand the power of the FBI to subpoena business documents and transactions from a broader range of businesses -- everything from libraries to travel agencies to eBay -- without first seeking approval from a judge.

    The new provision in the spending bill redefines the meaning of "financial institution." The wider definition explicitly includes insurance companies, real estate agents, the U.S. Postal Service, travel agencies, casinos, pawn shops, car dealers and any other business whose "cash transactions have a high degree of usefulness in criminal, tax or regulatory matters."
  9. dgmodel

    dgmodel Guest

    its more common than you think... and many trading firms have "boxes" that allow you to do so...
  10. What do you mean by boxes?
    #10     Jan 11, 2004