Front Running
Trading for the firm's or rep's own benefit ahead of a known customer order (typically a large block) that will move the price — exploiting knowledge of pending order flow.
Exam items hand you a fact pattern, not the label: a rep trades a security (or its options) for the firm or a personal account right before a customer’s market-moving block order. The tell is sequencing — if the firm’s trade lands first, pick front running. FINRA Rule 5270 reaches beyond the same stock to related financial instruments whose value tracks it — options, derivatives, security-based swaps — so a stock-tip-into-options play still counts (convertibles fit the same “substitute for the security” logic). Trading ahead of the firm’s own research-report release is the sibling violation often tested beside it.
The classic trap is confusing it with insider trading — front running exploits a pending order, not material nonpublic information about the company, so no corporate secret is needed. Don’t grab market manipulation either: front running rides a real order rather than faking activity (no wash trades or spoofing). And best execution (Rule 5310) is a separate duty owed on every order. Memory hook: front running is cutting the line ahead of your own customer.
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