Front-Running: SEBI's Measures To Safeguard Market Integrity

Front running involves individual(s) or entity(ies) executing buy or sell orders, on the floor of the stock exchange, based on prior knowledge of an upcoming large trade, where that upcoming trade (usually by institutions including mutual funds) is likely to influence the security's price. The intention of a front runner, in both cases unscrupulously and unethically, is to buy the security at a lower price and sell it to the institution at a higher price or sell the security at a higher price with the knowledge that the institution will subsequently sell and drive the price of the security below the front runner's sale price. The prior knowledge of a large trade gives an advantageous position to a front runner, and a front runner unduly benefits at the expense of other investors who are unaware of the upcoming trade. This has been a regulatory consideration for The Securities and Exchange Board of India (SEBI) for several years now.