ASIC: Insider trading in Australia has diminished over the last decade

Peter 9 August 2016

Australian trading market

Australia's listed equity market improves its cleanliness.

The latest review of Australia's equities market has revealed a decline in insider information and loss of confidentiality over the last 10 years.

The review, conducted by the Australian Securities & Investments Commission (ASIC), gauged the potential of insider trading and information leaks ahead of material, price-sensitive announcements by analysing price movements or shifts in trading behaviour prior to these announcements.

According to Australia's corporate regulator, in a clean market security prices should instantaneously react to new information released through the proper channels.

Key indicators of an "unclean market" include abnormal price movements and peculiar trading patterns ahead of announcements.

ASIC utilised both new and established measures to determine the purity of Australia's listed equity market.

The new market measure, developed by ASIC, investigates timely and profitable trading before material announcements, comparing the trading behaviour of individual accounts with others trading in the market.

95% of material announcements exhibited no (or negligible) questionable trading patterns ahead of announcements between November 2014 and October 2015.

The review found a general improvement in market cleanliness between 2005 and 2015.

"We have seen a gradual improvement in market cleanliness indicators over time and across different segments of Australia’s listed equities markets," ASIC commissioner Cathie Armour said.

Independent international research ranks Australia's trading market cleanliness as favourable when compared with other developed equities markets.

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