Inhibition Mechanism Of Stock Market Insider Trading

The term, insider trading, emerged since the appearance of securities market. The existence of insider trading comprises of various reasons. Many countries experienced same process of support, agreement, disagreement and prohibition for insider trading. Meanwhile, as judiciary and securities regulatory authorities discovered less insider trading cases than other fraudulent cases, provided a warm breeding ground for the development of insider trading.Due to its concealment characteristics, the discovered insider trading cases only constructed a small portion of the total amount. Meanwhile, as an emerging market, legislation and enforcement of China securities market for "market manipulation" and "insider trading" are flawed and inadequate, which seriously damaged investors'legitimate rights and interests, destroyed the order of market trading, harmed the interests of innocent traders, undermined investors'confidence for investment, and endangered the healthy development of China securities market. Our regulatory authorities initiated legislative regulation of insider trading, which was also the consensus of other countries.As long as we establish clear regulatory objectives, combine the characteristics and cause of insider trading, complete legislation regulation and relevant system, insider trading will be effectively controlled, thus creating a good order in the securities market.In this paper, the author firstly gave a literature review of international and domestic insider trading theories, and then focused on composition and hazards of insider trading. Moreover, the author analyzed the features and current situation of China capital market's insider trading, and discussed the formation mechanism. Features of insider trading were summarized as following: variety of main body and performance; publicity of insider trading behavior; universality at all levels etc. After that, the formation mechanism of insider trading was discussed. Gradual system evolution weakened corporation's governance effectiveness, also lack of internal dynamism and external pressure for regulation system resulted in insider trading. In order to better facilitate analysis of China regulation system, the author also discussed United Kingdom and United States'regulation measures and methods. After all, the existence of securities market in these countries are relatively long and at high level, research of their regulation system will help to improve the regulation system of China securities market. At last, the author gave specific methods for the regulation of China securities market, such as improvement of securities legislation and regulations, using various social resources to crack down on insider trading like using modern high-tech method to operate real-time monitoring.