SIE practice questionmediumTrade Execution
A broker accepts a buy order and then trades the same security for their own account before executing the customer’s order. What prohibited practice is this?
- AChurning
- BFront-running✓ Correct answer
- CBreakpoint selling
- DMarking the close
Explanation
Why B — Front-running
Front-running occurs when a broker trades a security for their own account ahead of a customer order, seeking to benefit from knowledge of the upcoming transaction. Churning involves excessive trading, while the other options are different violations.
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