Are you a "rat trader?" Probably not, but if that phrase is new to you (as it was to me until today), allow me to enlighten you.

Today I stumbled up on the following headline from the Chinese publication, Global Times: "Rat trader faces 5-10 years for insider dealing." Rat trader?? It turns out that in China, at least, "rat trading" is the phrase used to describe what we would call "front-running" in the U.S. As explained in the Global Times,

"Rat trading" refers to fund managers buying shares via their personal trading accounts ahead of large purchases of the same shares by their fund companies. Using this method, they can illegally profit from a rise in share price following the larger transactions.

Rat trading is illegal in China, and can lead to some serious time in prison. The rat trader who is the subject of the article noted above allegedly made more than 18 million yuan ($2.96 million) through his trades, and reportedly faces a sentence of five to 10 years in jail, plus fines.

Topics