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June 14, 2026
The Dispatch

Definition

Front Running

Front running is when someone trades ahead of a known large order, exploiting the price impact that order will create.

A classic case is a dealer or fund employee who, knowing a big client order is about to be placed, buys the stock first and sells into the price rise the client's order causes. It is a form of market abuse prohibited by SEBI.

Front running breaches fiduciary duty and harms the original investor, who gets a worse price. SEBI has penalised brokers, dealers, and even fund officials for front running mutual fund orders, often detected through trade-pattern and phone-record analysis.

Related terms

  • SEBISEBI is the Securities and Exchange Board of India, the statutory regulator of the securities markets, protecting investors and overseeing exchanges, intermediaries and listed companies.
  • Insider TradingInsider trading is the illegal practice of buying or selling securities based on material, non-public information about a company.
  • Pump and DumpPump and dump is a manipulation scheme where operators inflate a stock's price with hype, then sell their holdings to unsuspecting buyers, crashing it.

Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.