On March 7, the Financial Services Authority published OP25: Updated Measurement of Market Cleanliness with the results of its work to measure the cleanliness of the UK financial markets. The exercise examined the period of trading from 2004/2005. Although the results show that a decrease in the level of possible informed trading ahead of FTSE 350 companies' trading announcements, the level of suspicious trading remains high.
There had been possible insider trading ahead of a takeover announcement in almost one in four cases in 2005. The figure - 23.7% - is down from the 2004 figure of 32.4%, but is little changed since the introduction of FSMA (standing at 24% in 2000). There had been a significant decrease in the level of possible insider trading ahead of trading announcements - such as financial results and updates - by companies in the FTSE 350. In only 2% of those cases were announcements preceded by informed price movements in 2004/5, against 11.1% in 2002/3, and 19.6% in 1998-2000.
The FSA analyzed the potential for insider trading by, in the case of takeover announcements, looking at abnormalprice movements around the time of disclosure. The study only looks at cash equities, not derivatives or other trading instruments.