Interpositioning
Barron's Finance & Investment Dictionary:
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Interpositioning
placement of a second broker in a securities transaction between two principals or between a customer and a marketmaker. The practice is regulated by the Securities and Exchange Commission, and abuses such as interpositioning to create additional commission income are illegal.
| Interpolation, Internet Investing | |
| Interstate Commerce Commission (ICC), Intestacy; Intestate |
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Interpositioning
Investopedia Financial Dictionary:
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Interpositioning
The unlawful practice of adding an extra broker/dealer as a principal on a trade, even if no service is provided. Typically, interpositioning is done as part of a mutual benefit strategy, sending commissions to the broker/dealer in exchange for referrals or other cash profit. This type of behavior occurs at the upper levels of trade between specialists and broker/dealers, hedge funds or other institutional accounts.
Investopedia Says:
Interpositioning violates the Investment Act of 1940, which states that a money manager cannot do anything that intentionally defrauds or deceives a client. A wide-ranging case of interpositioning was found to have occurred among various specialists of the New York Stock Exchange in the 1999-2003 period; the SEC estimated that more than $150 million in customer harm was caused in the form of higher commissions and spreads.
Related Links:
Find out how this regulatory body protects the rights of investors. Policing The Securities Market: An Overview Of The SEC
The better you understand why insider trading can be criminal, the better you'll understand how the market works. Defining Illegal Insider Trading
Predated trades at regular intervals can instill confidence, not fear, for investors. Insider Selling Isn't Always A Bad Sign
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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