Piggybacking


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Piggybacking

A broker who trading stocks, bonds or commodities in a personal account following a trade just made for a customer. The broker assumes that the customer is making the trade on valuable inside information.

Piggybacking

The practice in which a broker conducts a transaction on his/her own account after filling a similar order on behalf of a client. For example, if a client sells 10,000 shares and the broker owns some shares in the same company, he may piggyback by selling his own shares. A broker piggybacks when he/she believes that the client has insider information, or at least a better understanding than the broker on the market's future movements. Piggybacking should not be confused with piggy back registration, which is a different concept altogether.
References in periodicals archive ?
The potential danger from piggybacking, and perhaps authorized-user credit accounts in general, is that its use might distort the quality of the signal that credit scoring provides.
QUESTION 2: CAN PIGGYBACKING MATERIALLY IMPROVE CREDIT SCORES?
The modest contribution that authorized-user accounts make, on average, to credit scores does not by itself imply that the score increases from piggybacking will be small, or that its effects on creditworthiness assessments will be immaterial.
The size of the potential score gains is important for gauging the dangers posed by piggybacking. If piggybacking has little effect on scores, or if the benefits are limited to a small portion of the population, then the harm that piggybacking might cause is small.
We approximate the characteristics of the type of account that might be available for piggybacking using values from the 90th percentile of the distribution for account age and credit limit, which translate into a credit limit of $15,000 and an account age of about 16 years.
Our simulation results suggest that piggybacking can increase scores significantly.
To assess the extent to which piggybacking can increase a person's credit risk profile, we divide the score range into four segments: sub-prime, near-prime, prime, and super-prime.
In contrast, people who are delinquent on an account remain so after piggybacking and therefore are less likely to benefit.
To evaluate how the potential score increases from piggybacking vary across credit records characteristics, we regress the simulated score changes on the number of tradelines on file, the utilization rate on revolving trades, the age of the oldest account on file, and the number of accounts that have been 90 or more days past due in the previous 24 months.
Indeed, for someone with two or fewer tradelines and a credit history of less than two years, the expected score increase from piggybacking will be around 20 percentile points.
One response to the threat piggybacking poses is to exclude authorized-user accounts from scoring models.
Various methods are used (these range from asking another employee for his or her card to piggybacking).