Written by:
Image
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated September 30, 2020

What is Tailgating?

Tailgating occurs when a broker buys or sells a security after doing the same for a client.

How Does Tailgating Work?

Let's say John Doe is a broker for Jane Smith. Jane calls John and tells him she just saw a press release that Company XYZ is bringing in a new hot-shot CEO. She tells him to buy 5,000 shares of Company XYZ for her account. John executes the trade for Jane and then tailgates by buying another 5,000 shares for himself because he has been watching Company XYZ and agrees with Jane that the CEO change should be a good thing for the stockholders.

In some cases, brokers tailgate when the client's order is so large that its execution will affect the price of the security.

Why Does Tailgating Matter?

Tailgating is not the same as frontrunning. In frontrunning, the broker executes the trade for his own account before executing the client's trade. In tailgating, the broker executes the trade for his own account after executing the client's trade. Frontrunning is illegal; tailgating is just in poor taste for many reasons, not the least of which is that the broker's job is to make money for his clients and know more than they do.

Ask an Expert about Tailgating
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Tailgating.
Be the first to ask a question

If you have a question about Tailgating, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Tailgating, then please ask Paul.

Ask a question Read more from Paul

Read this next

Paul Tracy - profile
Ask an Expert about Tailgating

By submitting this form you agree with our Privacy Policy

Share
close
Don't Know a Financial Term?
Search our library of 4,000+ terms