The Regulation of Outsider Trading in EU and the US

36 Pages Posted: 14 May 2015 Last revised: 15 Dec 2016

See all articles by Sergio Gilotta

Sergio Gilotta

University of Bologna - Department of Legal Studies

Date Written: December 14, 2016


This paper examines the regulation of outsider trading in EU and the US, highlighting the differences between the two legal systems and investigating the main implications of the different regulatory choices made in the two jurisdictions. Outsider trading can be defined as the sale or purchase of listed securities on the basis of material nonpublic information by individuals who do not qualify as “insiders”. While US law leaves considerable room to outsider trading, EU law unconditionally prohibits it. Constraining outsiders’ exploitation of material nonpublic information has a sound efficiency-grounded justification, but an unconditional ban on all informed trading by outsiders appears harmful: it hinders investors’ incentives in ferreting out new information, decreasing market efficiency and increasing agency costs of publicly traded firms. US law, with its selective limitation of outsider trading, appears largely immune from these consequences. EU law, to the contrary, has the potential to carry on such drawbacks.

Keywords: capital markets, securities regulation, insider trading, outsider trading, material information, price-sensitive information, market abuse

JEL Classification: K22, K42, G18

Suggested Citation

Gilotta, Sergio, The Regulation of Outsider Trading in EU and the US (December 14, 2016). European Company and Financial Law Review Vol. 13, No. 4, 2016, Available at SSRN: or

Sergio Gilotta (Contact Author)

University of Bologna - Department of Legal Studies ( email )

Via Zamboni 27/29
Bologna, 40126

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