Dual Trading

Dual Trading

The action of a broker executing customer orders and on the same day trading for his or her own account or an account in which he or she has significant interest. This is most prevalent in the futures market.

Notes:

Dual trading is a very controversial issue. Proponents say that by allowing brokers to trade in their own account as well as customer accounts, they contribute to market performance and liquidity since personal broker trades make up a large portion of volume. On the other hand, opponents say that eliminating or banning dual trading would not have an effect on market liquidity since dual traders do not make up a large portion of volume. Although the U.S. Congress put a ban on dual trading in 1989, they also provided several ways for futures exchanges to gain exception from this ban. These exceptions make it clear that Congress realizes that dual trading is standard practice in every major futures exchange worldwide as well in securities and cash markets. Today, there is still debate on whether dual trading affects market liquidity, with a mass of research studies and reports available on the internet.

See also: Agent, Broker, Chicago Board Options Exchange - CBOE, Dealer, Front Running, Futures, Futures Market, Liquidity, Liquidity Risk, Volume

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Dual trading

The custom of a trader on the commodities market to deal for its own account and the investor's account at the same time.