<P> For example, suppose a broker receives a market order from a customer to buy a large block--say, 400,000 shares--of some stock, but before placing the order for the customer, the broker buys 20,000 shares of the same stock for his own account at $100 per share, then afterward places the customer's order for 400,000 shares, driving the price up to $102 per share and allowing the broker to immediately sell his shares for, say, $101.75, generating a significant profit of $35,000 in just a short time . This $35,000 is likely to be just a part of the additional cost to the customer's purchase caused by the broker's self - dealing . </P> <P> This example uses unusually large numbers to get the point across . In practice, computer trading splits up large orders into many smaller ones, making front - running more difficult to detect . Moreover, the U.S. Securities and Exchange Commission's 2001 change to pricing stock in pennies, rather than fractions of no less than 1 / 8 of a dollar, facilitated front running by reducing the extra amount that must be offered to step in front of other orders . </P> <P> By front - running, the broker has put his or her own financial interest above the customer's interest and is thus committing fraud . In the United States, he or she might also be breaking laws on market manipulation or insider trading . </P> <P> Front - running may also occur in the context of insider trading, as when those close to the CEO of a firm act through short sales ahead of the announcement of a sale of stock by the CEO, which will in turn trigger a drop in the stock's price . Khan & Lu (2008: 1) define front running as "trading by some parties in advance of large trades by other parties, in anticipation of profiting from the price movement that follows the large trade". They find evidence consistent with front - running through short sales ahead of large stock sales by CEOs on the New York Stock Exchange . </P>

Churning front running and bucketing are types of