Invest
Aus equity cleanliness back on track after 2016 dive
Australia’s equity markets are currently operating with a high degree of integrity, according to a new review.
Aus equity cleanliness back on track after 2016 dive
Australia’s equity markets are currently operating with a high degree of integrity, according to a new review.
ASIC has undertaken a Review of Australian equity market cleanliness: 1 November 2015 to 31 October 2018, which focused on insider trading and information leaks ahead of material market announcements.
In a clean market, ASIC explained that prices immediately react after new information is released through the proper channels.
Abnormal price movements and unusual trading patterns ahead of market announcements may indicate an “unclean market”.
According to the securities and investments commission, a previous review had found an overall improvement in market cleanliness over the 10 years to 31 October 2015.
Between 2015 and 2018, the overall cleanliness of the market fluctuated, ASIC said.
A deterioration of market cleanliness occurred in 2016, before it improved again in 2017 and 2018 to settle around 2015 levels.
Over the three-year period reviewed, ASIC said it noted that, on average, 0.6 per cent of accounts that traded before material and “price-sensitive” announcements were deemed suspicious.
Suspicious accounts profitably traded on around 5 per cent of the volume before each announcement, on average.
ASIC highlighted that while the percentage of suspicious trading accounts remained stable over the three-year period, the volume traded did increase.
More suspicious trading occurred before merger and acquisition announcements than any other announcement type, with more suspicious trading and abnormal price movements also seen to occur before unscheduled announcements than scheduled ones.
ASIC also flagged that announcements from smaller companies in the materials sector were more likely to have unclean transactions occurring alongside their announcements than any other company subset.
ASIC commissioner Cathie Armour said “markets cannot operate with a high degree of integrity if people trade with inside information”.
“We expect all parties involved in mergers and acquisitions to put in place meaningful confidentiality controls at the start of a transaction – and make sure the controls are rigorously followed,” she said.
“Controls for some small-cap companies are clearly lacking and need to be tightened.”
ASIC said its findings complement independent research from 2018 that found Australia was the cleanest market over the last decade within a sample of major markets.
RELATED ARTICLES
About the author
About the author
Stock market
Portfolio reviews as an operating discipline: turning volatility into a competitive edge
In a higher-rate, higher-volatility world, portfolio reviews are no longer an annual hygiene task; they’re a core operating rhythm that protects cash flow, unlocks tax alpha, and sharpens risk ...Read more
Stock market
Fee war on the ASX: Global X’s A300 turns up the heat on core Aussie equity ETFs
Global X has lobbed a 0.04% management fee into Australia’s core equity sandbox, launching the Australia 300 ETF (A300) to take on entrenched giants. Read more
Stock market
Challenger IM shakes up the ASX with private credit note and a side of risk
Challenger Investment Management has taken private credit mainstream with an ASX-listed note structure—LiFTs—that secured roughly $100 million in cornerstone commitments within a day of launch. Read more
Stock market
International stocks: Diversifying your portfolio beyond Australia
In an increasingly globalized market, Australian investors have the opportunity to enhance their investment portfolio by incorporating international stocks. Diversifying your investments globally can ...Read more
Stock market
Stock market rally likely to continue regardless of Fed minutes tone, says deVere CEO
The bull run that has propelled Wall Street's major indexes to record highs this month is expected to continue regardless of the tone of the upcoming Federal Reserve minutes, according to Nigel Green, ...Read more
Stock market
US stock rally driven more by valuation growth than earnings, leaving tech names vulnerable: Innova
The strong gains in US stocks over the past year, particularly in the technology sector, have been driven more by expanding valuations than underlying earnings growth, leaving them exposed to a ...Read more
Stock market
Sun Silver to make its ASX debut with a $13 million IPO
Sun Silver Limited (proposed ASX Code: "SS1") has announced the opening of its Initial Public Offering (IPO) today, aiming to raise a minimum of $10 million and a maximum of $13 million (before costs)Read more
Stock market
Nasdaq hits record high, underscores the value of tech in investment portfolios
The Nasdaq Composite's surge to an all-time high last Friday highlights the importance of incorporating technology into investment strategies. Read more
Stock market
Portfolio reviews as an operating discipline: turning volatility into a competitive edge
In a higher-rate, higher-volatility world, portfolio reviews are no longer an annual hygiene task; they’re a core operating rhythm that protects cash flow, unlocks tax alpha, and sharpens risk ...Read more
Stock market
Fee war on the ASX: Global X’s A300 turns up the heat on core Aussie equity ETFs
Global X has lobbed a 0.04% management fee into Australia’s core equity sandbox, launching the Australia 300 ETF (A300) to take on entrenched giants. Read more
Stock market
Challenger IM shakes up the ASX with private credit note and a side of risk
Challenger Investment Management has taken private credit mainstream with an ASX-listed note structure—LiFTs—that secured roughly $100 million in cornerstone commitments within a day of launch. Read more
Stock market
International stocks: Diversifying your portfolio beyond Australia
In an increasingly globalized market, Australian investors have the opportunity to enhance their investment portfolio by incorporating international stocks. Diversifying your investments globally can ...Read more
Stock market
Stock market rally likely to continue regardless of Fed minutes tone, says deVere CEO
The bull run that has propelled Wall Street's major indexes to record highs this month is expected to continue regardless of the tone of the upcoming Federal Reserve minutes, according to Nigel Green, ...Read more
Stock market
US stock rally driven more by valuation growth than earnings, leaving tech names vulnerable: Innova
The strong gains in US stocks over the past year, particularly in the technology sector, have been driven more by expanding valuations than underlying earnings growth, leaving them exposed to a ...Read more
Stock market
Sun Silver to make its ASX debut with a $13 million IPO
Sun Silver Limited (proposed ASX Code: "SS1") has announced the opening of its Initial Public Offering (IPO) today, aiming to raise a minimum of $10 million and a maximum of $13 million (before costs)Read more
Stock market
Nasdaq hits record high, underscores the value of tech in investment portfolios
The Nasdaq Composite's surge to an all-time high last Friday highlights the importance of incorporating technology into investment strategies. Read more
