Which prohibition covers taking advantage of price movements before or concurrently with client orders to be executed?

Which prohibition covers taking advantage of price movements before or concurrently with client orders to be executed?

• A. Parking
• B. Front-running/Parallel-running
• C. Prohibition of price fraud
• D. Marking the close

Answer: (B)

This question tests the rule against using knowledge of a client order to profit from price moves before the order is executed. Front-running happens when a trader or broker uses non-public information about a client’s upcoming order to trade ahead of it, aiming to benefit from the expected price move. Parallel-running is the related idea of trading in parallel with the client’s order to capture the anticipated price movement as the client’s order is executed. Both practices are prohibited because they abuse client information and undermine market fairness. The other options describe different forms of market conduct: parking relates to actions around orders that aren’t about front-running, price fraud involves misrepresenting prices, and marking the close is about manipulating the closing price. They don’t capture the pre-trade advantage against a client’s order the way front-running/parallel-running does.

This question tests the rule against using knowledge of a client order to profit from price moves before the order is executed. Front-running happens when a trader or broker uses non-public information about a client’s upcoming order to trade ahead of it, aiming to benefit from the expected price move. Parallel-running is the related idea of trading in parallel with the client’s order to capture the anticipated price movement as the client’s order is executed. Both practices are prohibited because they abuse client information and undermine market fairness.

The other options describe different forms of market conduct: parking relates to actions around orders that aren’t about front-running, price fraud involves misrepresenting prices, and marking the close is about manipulating the closing price. They don’t capture the pre-trade advantage against a client’s order the way front-running/parallel-running does.