Insider trading v/s front running

This query is : Resolved

Share Report Follow Query Ask a Query

RAMAKANT HEMANI

RAMAKANT HEMANI (Querist)
Follow

10 August 2015 what is the difference between insider trading & front running ?

Arpit Shah

Arpit Shah (Expert)
Follow

10 August 2015 Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to nonpublic information about the company. In various countries, trading based on insider information is illegal

Arpit Shah

Arpit Shah (Expert)
Follow

10 August 2015 Insider Trading
nsider trading is defined as a malpractice wherein trade of a company's securities is undertaken by people who by virtue of their work have access to the otherwise non public information.

Definition: Insider trading is defined as a malpractice wherein trade of a company's securities is undertaken by people who by virtue of their work have access to the otherwise non public information which can be crucial for making investment decisions.

Description: When insiders, e.g. key employees or executives who have access to the strategic information about the company, use the same for trading in the company's stocks or securities, it is called insider trading and is highly discouraged by the Securities and Exchange Board of India to promote fair trading in the market for the benefit of the common investor.

Insider trading is an unfair practice, wherein the other stock holders are at a great disadvantage due to lack of important insider non-public information. However, in certain cases if the information has been made public, in a way that all concerned investors have access to it, that will not be a case of illegal insider trading.

Also See: Front Running, Securities, Insider, Insider Information, Material Insider Information, Misappropriation Theory, Public Information, Securities and Exchange Board of India

Arpit Shah

Arpit Shah (Expert)
Follow

10 August 2015 Front Running
If brokers illegally use this information to trade in securities to obtain profits on their personal account, such a practice is called front running.

Definition: Brokers have access to information related to the orders of investors in advance. If they illegally use this information to trade in securities to obtain profits on their personal account, such a practice is called front running.

Description: Brokers have access to information about crucial transactions even before they have taken place, which can be misused for personal benefit in trading. For example, if a broker is aware of an order for purchase of a large number of shares of XYZ Company and he also buys some shares of the same company for his personal account, this is a case of front running.

Experts say that complaints of such practices on part of commission agents and brokers keep arising in the commodity market and should be highly discouraged.

Also See: Insider Trading, Circular Trading, Flash Trading, Stock Brokers, Brokerage, Misappropriation Theory, Public Information, Securities and Exchange Board of India

Message likes : 1 times

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now