interpositioning

Interpositioning

An illegal action of a specialist or broker-dealer unnecessarily inserting him/herself into a natural transaction between a buyer and seller in order to pocket an improper profit.

Notes:

When this happens the specialist might only profit a small amount, but this can add up to a huge amount of money when repeated over time.

See also: Bucket Shop, Churning, Circular Trading, Front Running, Pump and Dump, SEC

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Interpositioning

The practice of using a second broker in a securities transaction, which is considered illegal it is if used to generate additional commission.

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interpositioning

The involvement of a third party between a broker-dealer and the best available market price that results in the customer paying a bigger markup or markdown than would have been the case if the third party had not been present. For example, Dealer A satisfies a customer order to buy a security by purchasing the security through Dealer B who in turn purchases the security from the market maker. Dealer B marks up the security to Dealer A, who then marks up the security again when selling it to the customer. Interpositioning is considered unethical by the National Association of Securities Dealers.