Is Wall Street front - running the Fed?


How does Wall Street make money? Even as financial reports link different kinds of trading and big profit numbers, they don't help the public understand exactly how the traders earned those out-sized profits. But it's really not that hard to understand, at least in part. One source may be a little practice called "front-running" and it takes many forms.

In a nutshell, Wall Street sometimes knows what its customers are going to do and it profits by getting there before its customers. If you knew, for example, that a customer was going to buy $40 billion worth of stock in, say, International Business Machines (IBM), you could just buy IBM shares for your own account and voila -- when that customer later makes that $40 billion purchase, the stock goes up and you take your profit. Of course, in its crudest forms, this is an illegal practice.