China's Stock Market Insider Trading And Market Manipulation Preventing Systems

Now, the insider trading and market manipulation were very complex in Chinese security market. There characters are as following. (1) The major offenders in insider trading were first insiders, not second insiders. The principal insider information was related to merge and acquisition, profit allocation. (2) The main offenders in manipulation were institute investors, especially security companies and insiders. The offenses were almost trade-based and information-based manipulation. Continuouse trading, wash sale, pool, improper matched order were the major forms during manipulation. The manipulator often made use of many accounts, with personal accounts special, and tried to control the listed company by purchaseing lots of shares. (3) Many other regulation offenses took place along with insider trading, manipulation. (4) The insider trader and manipulator were slightly punished majorly by fines.After empirical analysis, some results were got. Insider trading raised the average price and price volatility. The information used by insider was actually essential and the insiders obtained large abnormal return. Overally, the information asymmetry in trading became more serious during insider trading and information dissemination can decrease this serioursness.As for manipulation, the manipulator took on insider trading at the same time of manipulation. The stock tended to be manipulated with high concentration ratio of equity, few liquid equity and low turn-over ratio. The degree of manipulation can be interprted by how long the stock was manipulated. Relative to general AR model, the SETAR model was more suitable to describe the price movement during the manipulation.To help the practice of the guarding system, the author try to set up a discrimination model for insider trading and market manipulation, based on the samples of daily-average return and turn-over ratio during the time the equity changed. The criterion is to try to correctly find out the offense and the normal event.The model carries well.From the aspect of international comparation, insider information is generally refferd to secret and essential information. In defining and prosecuting insider, the first and second insider must be differentiated. Manipulation owns different forms in different countries because of the means used, aims, etc.. The ways to preventing manipulation should gurrant the authenticiy of the market price.At last, based on the Jiang et al. (2003) and the realities in Chinese security market, the author developed the overall system against insider trading, manipulation from the three aspects such as regulation on trading, information disclosure and investor education.