marketabuse

Market abuse refers to a range of illegal activities that distort the proper functioning of financial markets. These actions undermine market integrity by giving an unfair advantage to those who engage in them, harming ordinary investors and eroding confidence in the financial system. The primary types of market abuse are insider dealing and market manipulation.

Insider dealing occurs when a person trades securities on the basis of material, non-public information. This information, if disclosed, would likely affect the price of the security. Those with access to such information, such as company executives or employees, are prohibited from trading on it until it has been made public. The unfair advantage comes from knowing something others do not, allowing them to profit or avoid losses before the market reacts.

Market manipulation involves intentionally creating a false or misleading impression about the price, supply, demand, or value of a financial instrument. This can take many forms, including spreading false rumors to influence prices, engaging in deceptive trading practices like "spoofing" (placing and then cancelling large orders to create a false impression of demand), or executing trades to artificially inflate or deflate prices. The goal is to deceive other market participants and profit from the resulting price movements.

Regulatory bodies in most jurisdictions actively monitor financial markets to detect and prosecute instances of market abuse. Penalties for engaging in these activities can be severe, including substantial fines, disgorgement of profits, and imprisonment. The prohibition of market abuse is a cornerstone of fair and efficient financial markets.