Regulation Of Insider Trading

With the gradual trend towards financial globalization, the progress in science and technique, and the financial innovation, great changes have taken place in China's capital market, and the scale of the market has been on the rise with new financial institutions constantly emerging in the market, hence the new institutional investors are willing to participate in the market for their business which makes the capital market stronger and stronger. All those factors are connected with each other and live with each other, which makes the insider trading more possible and the regulation from the government more difficult, thus may potentially do harm to the market.This thesis herein tries to address this issue from the perspective of currently practical needs through analyzing the harm of insider trading and delving into the propagation mechanism through which the social benefit will be greatly harmed. Thus, we show the necessity to analyze theregulation of insider trading from the prospective of economic theory, especially the financial theory, and we propose correspondingly some policy suggestion as well as some ideas on the further development in the stock market regulation system in China by analyzing the regulation practice in the highly developed capital market. This thesis is composed of five chapters, in which the third and fourth chapter is the core parts. In the first chapter, we introduce the problem of insider trading regulation in the common sense and define some key notations involved, at the same time, we give an informal discussion of some seemingly simply but actually important, at least from the angle of regulation practice, conception for the purpose of further analysis later. This discussion provides us with a beneficial benchmark for delving into the issue to be addressed later. And we formally propose the problem: Do we need to regulate the insider trading in the stock market? Why? If do, how? And how to gradually adapt the current regulation system to the need for further development?The cross-country analysis of the regulation system,especially of the USA, the German and the UK, appears in the second chapter. The reason that we compare carefully the different regulation system lies in twofold. On the one hand, the three regulation practices are representative of three typical regulation modes, thus we can analyze the merits and shortcomings of each mode, which may give some insights into the insider trading regulation practice in China. On the other hand, the capital market account for significantly different part of the financial practice among the three countries, and we think that the experience of German will surely provide us more valuable information about the issue for its similarity to ours in many aspects, while the regulation in USA provides us with mature practice.The third chapter is a very important one in which we delve into the general regulation theory. The logic adopted here is that only when we have understood why the free market system need the intervention of the government, can we have a better understand of the necessity for the government to regulate the insider trading in the stockmarket! To show this logic clearly, we may give an example in a extreme sense: If some theory shows that the social economy need not regulation at all, it becomes meaningless to discuss the issue addressed here. In this chapter, we survey the main kinds of regulation theory and point out the flaws and merits in them respectively. As a matter of fact, any existed theory have its own rationality from the angle of logic analysis, thus although our reasoning below depends on the economic theory of regulation to a great extent, we adopt some idea from the "Public interests theory" of regulation. So, our analysis is a kind of synthesis, after all, it's out of our ability to create a new theory and set up a new analysis framework. The fourth chapter is the center of this essay in which we further into the regulation of insider trading, obviously based...