Pre-Arranged Trading

Filed Under » , , ,
Dictionary Says

Definition of 'Pre-Arranged Trading'

The buying and selling of futures, options or commodities that occurs between brokers or dealers at an agreed upon price. The practice of pre-arranged trading is illegal under the Commodity Exchange Act and Commodity Futures Trading Commission (CFTC) because it can create an unfair market for other brokers, traders and investors.

For example, two commodity dealers may use pre-arranged trading to execute risk-free trades at set prices rather than at market prices, thereby limiting risk, gaining tax advantages and limiting the market for other participants.

Investopedia Says

Investopedia explains 'Pre-Arranged Trading'

Pre-arranged trades are trades where an offer to sell is coupled with an offer to buy back, or where an offer to buy back is coupled with an offer to sell, at the same price or some other pre-arranged price that benefits the dealers or brokers engaging in the pre-arranged trading. These types of trades are prohibited because they are not exposed to the market risks that other investors would endure. In order for trades to be at the risk of the market, the first transaction (such as a buy order) must be made with no guarantee or assurance of the price of the second transaction (for example, the sell order). NYSE Rule 78 specifies that "An offer to sell coupled with an offer to buy back at the same or at an advanced price, or the reverse, is a pre-arranged trade and is prohibited. This rule applies both to transactions in the unit of trading and in lesser and greater amounts."
Search results for

'Pre-Arranged Trading'

  • What is a Bermuda swaption?

    http://www.investopedia.com/ask/answers/08/bermuda-swaption.asp
    ... However, the Bermuda swaption has prearranged limitations and rules on when to exercise ...
    Introduction to Swaps and Exotic Options: A Getaway From Ordinary Trading ...

  • Trading Options With The Zero-Cost Cylinder

    http://www.investopedia.com/articles/optioninvestor/09/zero-cost-cylinder.asp
    ... Over the years the ideas and strategies for trading the options markets have changed
    at ... put requires that the trader buy the option at the prearranged price if ...

  • What is a "daisy chain"?

    http://www.investopedia.com/ask/answers/09/daisy-chain.asp
    ... Active Trading; Forex; Personal Finance; Real Estate; Retirement; Insurance; ETFs;
    Options ... passing the securities through other brokers at prearranged higher prices ...

  • Lear Takes Avenue Capital For A Ride

    http://stocks.investopedia.com/stock-analysis/2011/Lear-Takes-Avenue-Capital-For-A-Ride-LEA-GM-F-JCI-TRW-GNTX-ARM0118.aspx
    ... $3.6 billion in debt into equity as part of its prearranged bankruptcy reorganization ...
    In addition, auto parts stocks are trading on average at 36.6 time's free ...

  • Target Your Retirement With Life-Cycle ETFs

    http://www.investopedia.com/articles/exchangetradedfunds/08/life-cycle-etf.asp
    ... This shifting occurs on prearranged schedules, such as on a yearly basis. ... On the
    other hand, a commission charge is associated with trading ETFs, while mutual ...

  • Dollar-Cost Averaging Pays

    http://www.investopedia.com/articles/mutualfund/05/071305.asp
    ... on a regular basis without worrying about the impact of trading costs ... automatically
    invested into a designated higher-risk mutual fund at pre-arranged intervals ...

  • Mortgage Basics: Fixed-Rate Mortgages | Investopedia

    http://www.investopedia.com/university/mortgage/mortgage1.asp
    ... While such an arrangement certainly results in a lower monthly payment during the
    first pre-arranged payment period ... Read More ยป. Trading Center. Partner Links. ...

  • 5 Mistakes That Make House Flipping A Flop Slideshow ...

    http://www.investopedia.com/slide-show/5-mistakes-to-house-flipping
    ... House flipping has become the day trading of the 2000s. ... Professionals either do the
    work themselves, or rely on a network of pre-arranged, reliable contractors ...

  • 5 Mistakes That Make House Flipping A Flop Slideshow ...

    http://www.investopedia.com/slide-show/5-mistakes-to-house-flipping/not-rnough-time.aspx
    ... House flipping has become the day trading of the 2000s. ... Professionals either do the
    work themselves, or rely on a network of pre-arranged, reliable contractors ...

  • 5 Mistakes That Make House Flipping A Flop Slideshow ...

    http://www.investopedia.com/slide-show/5-mistakes-to-house-flipping/not-enough-knowledge.aspx
    ... House flipping has become the day trading of the 2000s. ... Professionals either do the
    work themselves, or rely on a network of pre-arranged, reliable contractors ...

Related Articles

Partner Links