China’s Short-term Trading Classification System

Insider trading harms the development of securities trading markets and has received significant attention from securities market regulators in many countries.The inclusion of short-term trading profits as part of insider trading prevention measures not only effectively protects the legitimate rights and interests of investors but also ensures the fairness and orderliness of the securities trading market.The inclusion of short-term trading profits is a rough empirical rule that has advantages such as simple evidence and strong operability.Its essence is to include the short-term trading profits obtained by insiders into the company’s ownership to form a pre-regulation and deterrence mechanism for insider trading.China introduced this system in the 1990 s,but the relevant regulations are still too general and not very operable.There is no unified and coherent judicial thinking in judicial practice,which can easily lead to completely different processing results by different courts or regulatory agencies based on different standards,affecting the predictability of the consequences of their behavior and cannot effectively play the role of the short-term trading inclusion system,which is not conducive to the healthy development of the securities market.The problems with China’s short-term trading inclusion system are mainly manifested in the unclear criteria for identifying the subject,unclear definition of the object and behavior,narrow range of the subject’s exercise,and lack of clear regulations on the calculation method of profits.Therefore,it is necessary to improve the problems existing in China’s short-term trading inclusion system,including setting a fallback clause for the subject of short-term trading and adopting a "middle ground" standard for identifying the subject,adopting a non-exhaustive list to clarify the external extension of the object and clearly define the meaning of buying and selling,granting the supervisory board the identity of the subject’s exercise,strengthening the shareholder representative litigation mechanism,and using the highest selling price minus the lowest purchase price method to calculate profits and deducting normal transaction costs.By improving this system,strengthening the supervision and implementation of the short-term trading inclusion system,establishing a unified judicial standard,and protecting the healthy development of the securities market.