Understanding Trading, Customer Accounts and Prohibited ActivitiesDifficulty 2/5
A trader places an order for their own account ahead of a large customer order they know is coming. What is this?
- AFreeriding, a prohibited form of market manipulation
- BFront running, a prohibited form of market manipulation
- CBacking away, a prohibited form of market manipulation
- DMarking the close, a prohibited form of market manipulation
Show answer and rationale
Correct: B. Front running is trading ahead of a known customer order to profit from the price movement it will cause. All four options are genuine prohibited practices, which is why naming them precisely matters.
- C — Backing away is failing to honour a quoted price, which is a different prohibited practice.
- D — Marking the close is trading near the end of the session to influence the closing price.
- A — Freeriding is selling securities before paying for them in a cash account.