Front-running is a form of market misconduct in which a person deals for their own benefit using advance knowledge of a client’s order or another imminent transaction. Because the original order is expected to move the price, the front-runner profits at the client’s expense and undermines the firm’s duty to act in the client’s best interests. It is one of the clearest examples of a conflict of interest in financial markets.
How UK rules capture front-running
Front-running can engage several parts of the UK framework simultaneously. Where the advance knowledge constitutes inside information, dealing on it is insider dealing prohibited by Article 14 of the UK Market Abuse Regulation. Order-related front-running is also identified as a manipulative practice in the indicators set out in Annex II to the UK MAR Delegated Regulation. Separately, the FCA’s implementation of MiFID II requires firms to identify and manage conflicts of interest (SYSC 10), to act in the client’s best interests, and to provide best execution, all of which front-running breaches.
Why it matters
Beyond regulatory sanction, front-running attracts FCA enforcement, individual liability under the Conduct Rules and potential criminal exposure where the market abuse criminal offences apply. Firms control it through personal account dealing rules, information barriers, order-handling procedures and trade surveillance designed to detect proprietary trades that consistently precede client flow.
Who it applies to
Brokers, dealers, traders, portfolio managers and any staff with sight of client order flow or pending transactions.