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 ?
The panel found that JTF and Belesis traded ahead of 14 JTF customers who tried to sell their positions in AWSR, and had profited while customers who had tried to sell AWSR stock had been unable to do so.
Legal said it traded ahead of expectations in 2009 after it increased efficiency and focused new business activity on the markets it considers to be the most attractive in terms of growth potential.
The recently relocated branch at Cambridge as well as Liverpool and London's Oxford Street were the three that traded ahead of budget.
Supermarket giant Wal-Mart yesterday said its UK business Asda traded ahead of expectations during March.
In the complaint, NASD charged that in January and February of 2002, Metro Trading unlawfully traded ahead of a research report prepared by Tavares regarding Medi-Hut Co.
Three new TJs stores have opened in the current year which have all traded ahead of expectations, he added.
By attempting to create a safe environment where large liquidity providers can locate large liquidity seekers without the risk of being traded ahead of, crossing networks try to minimize market impact and information liquidity and simplify the trading process.
SUPERMARKET giant Wal-Mart says its UK business Asda traded ahead of expectations during March.