Front running occurs when a broker utilizes insider information regarding an imminent large customer order, known as a block transaction, to effectively “trade ahead” of such customer order for itself with the intention to profit.
For example, a broker receives an order to buy 50,000 shares of ABC Company for a client. Anticipating that ABC will increase in price due to the large order, the broker purchases shares of ABC for their own account. Since the broker purchased shares for their own account ahead of the customer order (regardless of whether or not they profit from the sale of these shares), they have engaged in front running.
Front running is plaguing the cryptocurrency industry, with exchanges both receiving orders and trading ahead of their clients. Our unique order matching technology coupled with the fact that we never act as principal on a trade allow LGO Markets to prevent any kind of front running on our platform.