Facts for Prelims (FFP)
Source: NIE
Context: The Securities and Exchange Board of India (SEBI) has banned five entities, including an employee of the Life Insurance Corporation of India (LIC), from the securities market for ‘front-running’
Explanation:
Front-running is an illegal practice in the stock market where an individual or entity trades based on advanced information obtained from a broker or analyst before it is made available to their clients.
For example, suppose a broker receives a large order to buy shares of Company X from a client. Before placing the order on behalf of the client, the broker may purchase shares of Company X for their personal account, knowing that the client’s order will drive up the price of the shares. Once the price of the shares rises, the broker can sell their shares at a profit.
