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The illegal buying or selling of securities on the basis of information that is unavailable to the public.
It is illegal when the material information is still nonpublic trading while having special knowledge is unfair to other investors who don't have access to such knowledge. illegal insider trading therefore includes tipping others when you have any sort of nonpublic
Joanne Skiles
Wiki User
∙ 10y agoInsider trading is taking advantage of other traders by using non-public information.
There are a lot of different kinds of insider trading. The most traditional is a company officer who knows either that his company is about to have news that will push the stock up so he buys a bunch to sell after the price rises, or who knows her company is about to have news that will push it down so she sells her stock before the price drops.
There's another kind - front running. When a company's stock is purchased, the stock price goes up ever so slightly...maybe a cent per share...and stays there for a very short period of time. What a front-runner does is looks at a company's order flow and trades ahead of it. Most front-runners are stockbrokers, because you almost have to be to make this work. Let's say I wanted to front-run your million shares of Ford. I would get your trade ticket and enter two orders: yours for a million shares, and mine for a million shares...but I'd hit send on mine just barely before hitting it on yours. In a couple of seconds, the price of Ford stock will go up a penny, and then I would sell my million shares. This happened so fast that I didn't have time to pay for the stock, but I will get to keep the $10,000 profit I just made.
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