| 1. | Informal. a person who obtains something without effort or cost. |
| 2. | a nonunion worker who enjoys the benefits of union activities. |
Freeriding
1. An illegal practice in which an underwriting syndicate member withholds part of a new securities issue and later sells it at a higher price.
2. The illegal activity of buying a stock and selling it before paying for the purchase.
Investopedia Commentary
Due to the unfair advantage both of these practices give to those able to exploit freeriding opportunities, freeriding is illegal and prohibited by the Securities & Exchange Commission and the National Association of Securities Dealers.
Related Links
Brokerage Functions: Underwriting And Agency Roles
Uncovering The Securities Firm
Policing The Securities Market: An Overview Of The SEC
The Murky Waters Of The IPO Market
See also: Bucket Shop, Front Running, National Association of Securities Dealers - NASD, New Issue, Securities & Exchange Commission - SEC, Underwriting
Also spelled: free riding, free-riding, freeriders, freeeriding, freeridings
freeriding
An action taken by a syndicate member to withhold a portion of a new security issue from sale because of a belief that a later reselling of the withheld security will yield a higher price. Freeriding is prohibited by the SEC.
The purchase and sale of a security in a short period of time without putting up any money. Freeriding by investors is prohibited by Federal Reserve Board's Regulation T. Compare frozen account.