SIE Exam Question 427: Answer and Explanation

Question: 427

Front-running refers to the practice of:

• A. Inter-positioning
• B. Trading ahead of research reports
• C. Trading ahead of a customer's block order
• D. Trading ahead of marketable customer orders

Correct Answer: C

Explanation:

C: Front-running is the practice of trading for one's own account in front of a large customer trade (for example a block trade of 10,000 or more shares), because you believe the order will impact the market price of the security. It is a form of insider trading.