A Dealer Member's proprietary trading desk learns from an internal source that a pending research report will include a material downgrade of a security. The desk immediately enters a large principal order to sell its entire position in the security before the report is published. Which rule does this action most directly violate?

Question

Accepted Answer

Correct. This is a classic example of frontrunning. UMIR Rule 4.1 prohibits a Participant from knowingly taking advantage of information about its own un-entered client orders or non-disclosed research reports by entering a principal order.

Discussion