Front-Running

Front-running refers to the practice of traders or brokers jumping in and trading ahead of execution a third-party trade to profit when trade moves the market price. This is generally illegal and amounts to trading on material non-public information (a.k.a. insider trading). Analysts or employees of banks or brokerage houses who put on positions ahead of a buy recommendation going out to clients is another example of front-running. Index front-running, which occurs when traders load up on stocks ahead of their possible inclusion in indices (which drives the price up as index tracking funds would have to buy) is generally not illegal as it is not based on non-public information.