ASIC puts insider trading under the microscope

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By Jim Holding, Lyndon Masters and Daniel McGuiness

The Australian Securities and Investments Commission (ASIC) has announced that its new $43.7m (£24.2m) next-generation market surveillance system has become operational. The system, known as Market Analysis Intelligence (MAI), will allow ASIC to monitor up to one billion order changes per day. On this basis, MAI will have sufficient capacity to monitor trades where algorithmic trading and high-frequency trading are becoming more prevalent in Australia.

This represents a significant upgrade in comparison to ASIC’s previous capabilities in detecting insider trading and other market misconduct prohibitions. Under the old system, when a suspicious trade occurred, ASIC would request that the broker provide a list of their clients who participated in the trading of that security on the day in question. ASIC would then undertake the labour-intensive task of manually matching the suspicious trades against the relevant individual/s provided by the broker. In contrast, MAI will enable ASIC to monitor significant amounts of data relating to a single investor in real time. This will allow ASIC to determine more efficiently, and effectively, who in particular is gaining from trades prior to company announcements and, in doing so, targeting its resources to investigate accordingly…

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