All About Front Running Explained

Jun 17, 2025 | 3 min read

What is front running?

Front running is an illegal trading action where someone with insider knowledge, for example a broker, trader, or insider, first executes their own transaction before a large client order is carried out. It literally means the "accelerated execution" of orders based on insider information. Front running is a common term in the financial markets and the world of cryptocurrency. Someone who commits front running can gain unfair advantages because they have knowledge of upcoming transactions and can thus profit from expected price movements.

Example:

Suppose: someone works at a broker and knows that a client is about to buy a large amount of Bitcoin (insider knowledge). Even before the transaction is executed, the broker buys in themselves at the lower price. Once the client places the large order, the price may rise. The broker profits from this price increase by selling their digital assets at a gain. As a result, the client may pay a higher price than originally intended because the broker bought the crypto first.

Front running is therefore considered unethical or even illegal in many financial markets. Front running resembles insider trading, but they are different concepts: insider trading involves non-public information about developments within a company or project.

Originally, front running was mainly seen in traditional stock and currency markets, but it has since become a known phenomenon in the cryptocurrency world as well. In the crypto world, it is often bots or smart algorithms that search through the order book for large, not yet processed transactions they try to beat. In the DeFi world, this is also called Maximal Extractable Value (MEV), where it is mainly the miners or validators who profit from it.

Key Takeaways

Front running means someone with insider knowledge places their own order before an expected large client order.
This practice refers to abusing information to gain financial advantage.
It occurs in traditional and crypto markets, where bots and algorithms are often used in crypto.
Consequences include worse prices for clients, market disruptions, and reputational damage.
In regulated markets it is illegal; on decentralized exchanges in crypto, it is countered with technological solutions.

What are the consequences of front running?

Front running is illegal and unethical in many cases. For example, it is prohibited in financial markets such as stocks and forex because it is often seen as misuse of insider information and falls under market manipulation. Although in crypto markets it is technically not always illegal, because it does not fall under traditional legislation. Additionally, it has other harmful consequences for individual investors and the market as a whole:

Worse price for clients
The client who wants to place an order can become a target of front running and receive a worse price. The client is effectively exploited and ends up paying more or receiving less.
Market disruption
Front running can cause market disruption, leading traders to lose confidence in the trading platform or the entire market. For example, when market participants observe that front running occurs.
Reputational damage for brokers or platforms
Brokers who engage in front running risk their reputation and may lose customers. Or decentralized exchanges (DEXs) can be targeted by MEV attacks and also lose users.
Legal and regulatory risks
In most regulated markets, front running is prohibited. Brokers or other insiders caught front running can face fines or lose their licenses.

How is front running prevented?

Because front running is harmful to the market, both traditional and crypto markets take various measures to limit or prevent it. Below is an overview of how it is addressed:

Supervision and regulation in financial markets

In regulated markets such as stocks, front running is strictly tackled. Supervisors actively monitor unusual trading volumes and certain order timings that could potentially be influenced by insider knowledge. Companies that violate these rules can face legal prosecution and heavy fines.

Technological solutions in crypto

In the world of blockchain and crypto, this is all more difficult because oversight in this market is organized differently. Therefore, there are mainly technical solutions to counter MEV and front running, such as:

Randomized transaction ordering
Some blockchains experiment with randomly or confidentially ordering transactions. This prevents bots from seeing in the mempool which transactions are coming and abusing that in advance.
Batch auctions
Instead of processing individual transactions directly, they are processed in batches. This makes it impossible to execute a transaction earlier and try to beat a large client order.
Privacy solutions
New protocols temporarily hide the content of transactions, so front runners can no longer see what is coming.
Fair sequencing services
These services determine the order of transactions fairly, without miners or validators being able to interfere.

Education and awareness

For retail investors, it is important to be aware of the risks of front running, especially in DeFi environments. By using trusted wallets and DEXs with anti-MEV mechanisms.

Final thoughts

Front running is a form of market manipulation where insider knowledge is abused to make profits at the expense of others. Although it is punishable in regulated financial markets, it remains a major challenge in the crypto sector due to the lack of central regulation and supervision. Thanks to technological innovations and growing awareness among investors, however, more and more steps are being taken to combat these unfair trading practices.