What Is Front Running?

Front-Running: The Shady Tactic Most Crypto Exchange Don’t Want You to Know About

You’re trying to trade crypto and make some gains. After conducting thorough research, you place your order, only to have it filled at a price significantly lower than the one you initially selected for execution. Have you ever questioned why this happens?

There's a substantial chance you're getting front-run.

What is Front-Running?

Front-running is when someone with inside information or an advantage jumps ahead of your trade to profit from it.

In the stock market, it's illegal. In the uncharted territory of cryptocurrency, things often proceed as usual.

In crypto (and finance in general), here’s how it works:

Let’s say you place a big buy order for Bitcoin.

A front-runner sees your order before it gets executed, and they quickly place their buy order ahead of yours because they have tech fast enough to do that. Not only does their order push the price up so you end up slipped, but they then turn around and sell the asset back to you, pocketing the difference.

It’s like this:

You’re about to grab the last concert ticket online, but someone watching your screen refresh jumps in milliseconds before you and buys it only to turn around and sell it back to you at a higher price. Rude? Yes. Traditional markets forbid such practices. Common in crypto? Unfortunately, unless you're on an exchange that provides protection, such as Ouinex, where institutions cannot access the order book, the answer is yes.

How Does Front-Running Happen on Crypto Exchanges?

Most crypto exchanges use the CLOB (Central Limit Order Book). It’s supposed to be transparent, but it has a fatal flaw: everyone can see the orders.

Here’s how institutions exploit this:

• They see your orders: Big players can see your buy or sell orders before they’re executed as the CLOB is open for all traders.
• They jump ahead: They place their orders to buy (or sell) before yours, driving the price up (or down) just before your order is executed.
• You get screwed: You end up buying for a higher price or selling for a lower one in short, you get slipped.* 

Front-running is essentially exploiting knowledge of an upcoming large order to profit from the price movement that order will cause.

Here’s how it works in different scenarios and how the institutions profit from it:

1. Buying in anticipation of a large buy order:

• A front-runner sees a large buy order that is about to come into the market.
• They swiftly acquire the asset before executing the large order.
• The large buy order then drives the price up (because it increases demand).
• The front-runner then sells the asset to the large order (or other market participants) at the higher price, making a profit.

2. Selling in anticipation of a large sell order:

• A front-runner sees a large sell order about to enter the market.
• They sell the asset quickly before executing the large sell order.
• The large sell order drives the price down (because it increases supply).
• The front-runner then buys back the asset at the lower price, making a profit.

Why Is Front-Running So Common?

Crypto exchanges frequently ignore these issues. TheThey are closely aligned with the institutions that offer liquidity.

Basically, they prioritize the big guys over you.

Ouinex: No Front-Running Allowed

Ouinex's no-CLOB model puts an end to this BS.

In short, we:

• Separated institutions from retail traders… We constructed a "Chinese wall" to prevent institutions from accessing the order book. 
• Ensured only the best bid/ask prices from the institutions are entered into the order book, meaning the institutions compete against one another to create the best prices for you.
• This also means institutions only make prices (and can’t take prices), meaning you don’t compete against them.

Key Takeaways (not completed yet)

• Institutions use faster tech to front-run your trades, buying ahead of you, pushing up the price, then selling it back to you for more.
• It happens on exchanges using the CLOB model, where everyone (including institutions) can see your orders before they execute.
• Illegal in TradFi. The majority of cryptocurrency exchanges allow it. Why? The exchanges benefit from institutions providing liquidity even if it screws over retail traders.
• Ouinex ends front-running with a no-CLOB execution model that ensures retail traders aren’t competing against big financial institutions.

FAQs About Front-Running in Crypto Trading

What is front-running in crypto trading?
Front-running is when a trader (usually an institution) uses insider info or faster execution tools to jump ahead of your order. They buy or sell just before your trade goes through, driving the price against you and profiting from the move.

Is front-running illegal in crypto?
Is front-running illegal in traditional finance? Illegal.

In crypto? Not always. Most crypto exchanges using the CLOB model allow visibility into the order book, making front-running easy and common.

How do institutions front-run trades on crypto exchanges?
Institutions can see your open orders in the order book. Using high-speed algorithms, they place their orders ahead of yours, causing price movements that benefit them—and leave you with slippage and worse pricing.

Why does the CLOB model allow front-running?
The Central Limit Order Book (CLOB) is transparent by design. But in crypto, this transparency gives institutions an unfair advantage. They can see and react to your orders faster than you can execute them.

How does front-running affect retail traders?
Retail traders often end up buying at higher prices or selling at lower ones than expected. Institutions pocket the profit while you suffer the consequences. It’s a rigged game unless you trade somewhere that levels the field, like we aim to do with our no-CLOB execution model.

How does Ouinex prevent front-running?
Ouinex uses a no-CLOB execution model. We:

• Separate retail traders from institutions with a “Chinese wall”.
• This implies that institutional traders only receive the current prices and cannot view the order book.
• The institutions compete with one another to make the best bid/ask prices that are fed into the order book.
• Institutions only set prices; they don't take them (they're competing with each other to give you the best price so that their orders are chosen).

Could you please explain the advantages of institutions exclusively setting prices on Ouinex?
They provide liquidity without being able to exploit it. Institutions compete to offer the best bid/ask prices, but they can't take trades from retail users. That means no front-running, no price sniping, just better execution for you.

Is Ouinex better for retail traders than CLOB-based exchanges?
If you value fair pricing and transparent execution, yes. Ouinex's model is built to protect retail traders, not cater to institutional ones, though we’ve worked very hard to build excellent collaborations with market makers to ensure deep liquidity.

On Ouinex:

• Market makers and institutions can’t manipulate the order book or play nasty tricks, so no front-running, spoofing, layering, stop hunting, etc.
• MaMakers and institutions don’t compete against you because they can’t take prices, meaning there’s no unfair advantage even if they have deeper pockets and faster trading tools.
• We offer lightning fast execution and deep liquidity, which means little to no slippage… But unlike other exchanges, we show the slippage in real time; you can set how much negative slippage you allow with our slippage control tool, and we pass on positive slippage.  
• There are no hidden costs: trading fees, slippage, and spreads are all visible.

While we don't steal from the rich to feed the poor, we have endeavoured to create an equitable environment.