Interpositioning: A Comprehensive Guide to Its Legal Implications
Definition & meaning
Interpositioning refers to a trading practice where a specialist executes trades on their own account between orders from public customers. Instead of directly matching a buy order with a sell order, the specialist buys the stock for themselves and then sells it to the other customer. This practice aims to profit from minor price discrepancies between the two transactions. As a result, at least one of the customers may receive a less favorable price than they would have otherwise obtained.
Legal use & context
Interpositioning is primarily relevant in the context of securities trading and market regulation. It is often scrutinized under securities law to ensure fair trading practices. This term is significant in civil law, particularly in cases involving market manipulation or unfair trading practices. Users can manage related legal issues using templates from US Legal Forms, which are designed by experienced attorneys.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A specialist receives a buy order for shares at $10 and a sell order for the same shares at $10.05. Instead of matching these orders, the specialist buys the shares at $10 and then sells them at $10.05, pocketing the difference.
Example 2: A hypothetical example involves a specialist who buys shares from one customer at $15 and sells them to another customer at $15.10, taking advantage of the small price difference.