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23 March, 20:36

A broker learns that one of his institutional clients is about to enter a buy order for 10,000 shares of ABC stock. The broker tells one of the principals of the broker-dealer and the broker-dealer immediately enters a proprietary buy order for 10,000 shares of ABC stock ahead of the client's order. This trade is generally prohibited as front running but would be permitted if:

[A] The firm can demonstrate that the trade is unrelated to the customer's block order

[B] The trade was made to fill or facilitate the customer's block order

[C] The trade is executed on a national stock exchange and in compliance with its rules

[D] All of the above.

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  1. 23 March, 21:46
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    [D] All of the above.

    Explanation:

    Front running is the process by which a party to a share purchase has initial knowledge of the future market value of shares that are yet to be issued and makes a proprietary buy order for stock ahead of the client's order.

    Normally this can be as a result of insider information which is prohibited, but the options above all allow this practice.

    -If the firm can demonstrate that the trade is unrelated to the customer's block order

    -If the trade was made to fill or facilitate the customer's block order

    -If the trade is executed on a national stock exchange and in compliance with its rules
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