How Does the Legal Definition of “Insider Trading” Apply to Front-Running?
Insider trading is trading based on material, non-public information (MNPI) in breach of a duty of trust or confidence. Front-running is a specific form of insider trading.
It involves an intermediary using MNPI about a client's pending order to trade for personal profit, which is a breach of their fiduciary duty to the client. In the crypto context, a CEX employee front-running a client's order is a clear case of insider trading.
Glossar
Exchange Insider Trading Crypto
Information ⎊ Exchange insider trading in crypto involves utilizing non-public information about upcoming events, such as token listings or major announcements, to execute profitable trades before the information becomes public knowledge.
Genuine Trade Definition
Execution ⎊ Genuine trade definition within cryptocurrency derivatives centers on the verifiable fulfillment of contractual obligations, specifically relating to the exchange of underlying assets or cash flows at a predetermined price and date.
Max Fee per Gas Definition
Definition ⎊ The Max Fee per Gas Definition specifies the absolute upper limit a transaction sender is willing to pay for each unit of computational effort, or gas, consumed during execution.
Margin Balance Definition
Definition ⎊ The Margin Balance represents the total value of assets held in a trader's derivatives account that is available to cover potential losses and satisfy margin requirements for open positions.
Extrinsic Value Definition Options
Valuation ⎊ The determination of an option's premium is partitioned into two primary elements: the amount by which the option is in-the-money, and the speculative component reflecting future uncertainty.
Increment Size Definition
Definition ⎊ This specifies the smallest permissible non-zero change in the price or quantity of an order or quote within an exchange's order book.
Slippage Definition in Crypto
Definition ⎊ Slippage, within cryptocurrency markets and derivative instruments, represents the difference between the expected price of an order and the price at which the order is ultimately executed.
Unrealized Losses Definition
Loss ⎊ An unrealized loss represents a decrease in the value of an asset or portfolio position that has not yet been sold or closed.
Arbitrageur Definition
Action ⎊ An arbitrageur executes simultaneous transactions to capitalize on price discrepancies for an asset across multiple markets.
Predatory Front-Running
Action ⎊ Predatory Front-Running is the unethical and often illegal trading action where an actor, possessing privileged knowledge of a pending transaction, executes their own trade ahead of the victim's order to profit from the anticipated price movement.