Prearranged Trading Law and Legal Definition

Prearranged trading is a trading between brokers in accordance with an expressed or implied agreement or understanding that gives the appearance of trading for purposes of inducing others to trade. [In re Enron Corp. Secs., 235 F. Supp. 2d 549 (S.D. Tex. 2002)]. Prearranged trading is a violation of the Commodity Exchange Act and CFTC regulations.

Any purchase or sale transaction or series of transactions coupled with an agreement, arrangement or understanding directly or indirectly to reverse such transaction or series of transactions or limit the risk of either party to the transaction which would violate the securities acts or rules of self regulatory organizations is commonly known as prearranged trading. [United States v. Milken, 759 F. Supp. 109, 128 (S.D.N.Y. 1990)].