Insider Trading Rules and Price Formation in Securities Markets - An Entropy Analysis of Strategic Trading

2005 ◽  
Author(s):  
Karl Ludwig Keiber
Keyword(s):  
Insider Trading ◽  
Price Formation ◽  
Securities Markets ◽  
Entropy Analysis ◽  
Trading Rules ◽  
Strategic Trading

INSIDER TRADING RULES AND PRICE FORMATION IN SECURITIES MARKETS: AN ENTROPY ANALYSIS OF STRATEGIC TRADING

2006 ◽  
Vol 09 (08) ◽  
pp. 1215-1243
Author(s):  
KARL LUDWIG KEIBER
Keyword(s):  
Information Theory ◽  
Insider Trading ◽  
Market Price ◽  
Securities Market ◽  
Price Formation ◽  
Securities Markets ◽  
Informational Efficiency ◽  
General Criterion ◽  
Maximum Information ◽  
Trading Rules

This paper addresses the issue of how insider trading rules affect price formation in securities markets and suggests the application of information theory to market microstructure theory. We analyze a variant of the setting in [20] by simply introducing a more general criterion for informational efficiency borrowed from information theory — namely maximum information transmission. The analysis shows that both the insider's optimal trading strategy and the market price of the risky security depend on the insider trading restriction. Insider trading restrictions are reported to be detrimental to the liquidity of the securities market. We find that a unique insider trading rule exists which implements semi-strong form informational efficiency of the securities market. Alternative restrictions on insider trading give rise to either underreaction or overreaction in securities prices. Too strict insider trading rules are shown to account for excess volatility in securities prices. Contrary to common notion, the uninformed investors are shown to be hurt by too restrictive insider trading rules. We conclude that loose insider trading rules are preferred by the group of investors as a whole.

Part II UK Securities Markets, 8 Transaction Reporting

2021 ◽  
Author(s):  
Hanif Saima
Keyword(s):  
Financial Market ◽  
Competent Authority ◽  
Price Formation ◽  
Securities Markets ◽  
Regulatory Body ◽  
Reporting Requirements ◽  
The Uk ◽  
Financial Market Crisis

This chapter explains “transaction reporting” as the process by which detailed information about a transaction is submitted to the appropriate regulatory body. It draws attention to the European transaction reporting requirements, particularly Article 20 of the Investment Services Directive, that can be traced to 1993. It also discusses the significant expansion of the pan—European harmonised approach to transaction reporting in 2008, following the introduction of new measures to address weaknesses and close loopholes caused by the financial market crisis. This chapter outlines how transaction reporting provides the Financial Conduct Authority (FCA) in the UK with a representation of the transaction that informs the competent authority about all the relevant circumstances under which the transaction took place. It describes how transaction reporting is operationally and conceptually distinct from “trade reporting” that is more concerned with the price formation.

scholarly journals A Global Comparison of Insider Trading Regulations

2013 ◽  
Vol 3 (1) ◽  
pp. 1 ◽  
Author(s):  
James H. Thompson
Keyword(s):  
Insider Trading ◽  
Public Information ◽  
Global Markets ◽  
Securities Markets ◽  
Business World ◽  
Global Comparison ◽  
The World

As the business world continues to expand in global markets, trading of shares, bonds, derivatives and other instruments continues to increase.  One form of trading that has received considerable interest in recent years is insider trading.  Insider trading occurs when individuals with potential access to non-public information about a corporation buy or sell stock of that corporation.  When the information is material and non-public, such trading is illegal.  However, if the trading is done in a manner that does not take advantage of non-public information, it is often permissible.  This study compares insider trading laws, penalties, and convictions in countries represented by the 14 largest securities markets throughout the world and provides data indicating that there are important differences.

scholarly journals A Comparative Synopsis of the Enforcement of Market Abuse Prohibition in Australia and South Africa

2016 ◽  
Vol 9 (1) ◽  
pp. 46-77
Author(s):  
Howard Chitimira
Keyword(s):  
South Africa ◽  
South African ◽  
Insider Trading ◽  
Regulatory Framework ◽  
Securities Markets ◽  
Market Manipulation ◽  
Market Abuse ◽  
The Government ◽  
Australian Experience

In Australia, the market abuse prohibition is generally well accepted by the investing and non-investing public as well as by the government. This co-operative and co-ordinated approach on the part of all the relevant stakeholders has to date given rise to an increased awareness and commendable combating of market abuse activities in the Australian corporations, companies and securities markets. It is against this background that this article seeks to explore the general enforcement approaches that are employed to combat market abuse (insider trading and market manipulation) activity in Australia. In relation to this, the role of selected enforcement authorities and possible enforcement methods which may be learnt from the Australian experience will be isolated where necessary for consideration in the South African market abuse regulatory framework.

scholarly journals Exchange Trading Rules, Surveillance, and Insider Trading

2011 ◽  
Author(s):  
Douglas J. Cumming ◽  
Feng Zhan ◽  
Michael J. Aitken
Keyword(s):  
Insider Trading ◽  
Trading Rules
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