Trading Ahead

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Trading Ahead

A New York Stock Exchange rule violation. Basically, in this situation the specialist puts their firm's interest ahead of the investor's interest. Consider an example. Suppose that the specialist simultaneously receives orders from two investors, one to sell 5,000 shares of XYZ and one to buy 5,000 shares of XYZ. Normally, these orders are matched. However, suppose that the specialist substitutes (matches) her own firm's 5,000 shares of XYZ. That is, the firm's own shares are sold instead of the order that came in previously. This disadvantages the buyer because the very next transaction will be the order to sell 5,000 shares of XYZ (which will likely put downward pressure on the price). Notice that the firm has bailed out of XYZ at a higher price than if the order was reversed (the specialist's firm selling afterwards). Trading ahead is part of what is known as negative obligation. Trading ahead should not be confused with front_running.

Trading Ahead

A trade in which a specialist, one who trades only to maintain liquidity in the market, makes a trade when there is an offsetting trade from someone else. For example, suppose a specialist receives an order to buy 100 shares of a stock. Ordinarily, the specialist would look for an offsetting order from the public and only sell the shares from its own account if no such order exists. The specialist trades ahead when it sells 100 shares to the buyer when another order is on record. The specialist does this in order to make a profit for itself. Trading ahead is a violation of NYSE and other rules. See also: Front running.
References in periodicals archive ?
Summary: Arab and African ministers hope to accelerate strategy to bolster economic cooperation, and trade ahead of Third Africa Arab Summit.
Summary: The rupee weakened in early trades on Friday, weighed down by month-end dollar demand and cautious trade ahead of the crucial growth data set to be released later in the day.
FASHION retailer Ted Baker said it continued to trade ahead of expectations after another strong performance from its UK stores.
Meanwhile, Asda's US parent Wal-Mart said last week that the supermarket had continued to trade ahead of expectations after seeing a "mid-single digit" sales increase in the UK over Christmas.
Research published in this week's Nature journal by conservation scientists from Paris and Kent suggests tighter controls - known as uplist-ing - can result in an increase in legal trade ahead of a ban.
In a five-day trip, he will stop off in Libya, Sierra Leone and South Africa, where he will highlight the issues of aid, climate change and fairer trade ahead of a series of international summits before his departure next month.
This separate agreement--deemed necessary to avoid any disruption in trade ahead of the full entry into force of the Wine Agreement--was approved in the form of an exchange of letters between the two parties.
In New York on Tuesday, currency investors were largely reluctant to trade ahead of Wednesday's congressional testimony by U.
The FTSE/Xinhua China 25 Index closed slightly higher as oil stocks gained ground on increasing oil prices in a half-day of trade ahead of the Christmas holiday, analysts contacted by Xinhua Financial Network said.
At such times, the specialist steps in to provide liquidity, or intermittent liquidity, to bridge that supply and demand, Specialists are responsible for an orderly market, are expected to use their capital and never trade ahead of a customer -- always yield to a customer or individual order, and insure that information about trades is out within seconds.
They fear a drift toward what one aide to Senator Jesse Helms calls a "Clinton-like policy," that puts trade ahead of security and human rights concerns.
Had people been worried about the market closing, they might have tried to trade ahead of that,'' sending stocks down further still, he said.

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