Exchange Trading Rules, Surveillance, and Suspected Insider Trading

Aitken, Michael J.; Cumming, Douglas J.; Zhan, Feng

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Exchange Trading Rules, Surveillance, and Suspected Insider Trading

Journal of Corporate Finance, Forthcoming

53 Pages Posted: 12 Jun 2015

See all articles by Michael J. Aitken

Douglas J. Cumming

Florida Atlantic University; Birmingham Business School; European Corporate Governance Institute (ECGI)

Feng Zhan

Western University

Date Written: June 11, 2015

Abstract

We examine the impact of stock exchange trading rules and surveillance on the frequency and severity of suspected insider trading cases in 22 stock exchanges around the world over the period January 2003 through June 2011. Using new indices for market manipulation, insider trading, and broker-agency conflict based on the specific provisions of the trading rules of each stock exchange, along with surveillance to detect non-compliance with such rules, we show that more detailed exchange trading rules and surveillance over time and across markets significantly reduce the number of suspected cases, but increase the profits per suspected case.

Keywords: Insider trading, Surveillance, Exchange Trading Rules, Law and Finance

JEL Classification: G12, G14, G18, K22

Suggested Citation: Suggested Citation

Aitken, Michael J. and Cumming, Douglas J. and Zhan, Feng, Exchange Trading Rules, Surveillance, and Suspected Insider Trading (June 11, 2015). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2617301