SIE practice questionmediumTrade Execution
A broker receives a buy order from a client and buys the same security for their own account just before executing the client's order. What prohibited activity has occurred?
- AChurning
- BFront-running✓ Correct answer
- CInsider trading
- DPainting the tape
Explanation
Why B — Front-running
Front-running is when a broker places personal trades ahead of a client order to benefit from anticipated price movement. Churning involves excessive trading; insider trading is misuse of material non-public information; painting the tape is market manipulation.
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