Australian equities industry squeaky clean

A recent Australian Securities and Investments Commission (ASIC) report found Australia’s equity markets to be one of the most efficient (‘cleanest’) in the world. The report says that our local markets operate with a high degree of integrity, after reviewing the period from 1 November 2015 to 31 October 2018.

The report centred around insider trading and information leaks ahead of announcements to determine cleanliness. The report that came before was a 2016 review that found a general improvement in the industry over the past decade, despite cleanliness fluctuating over the past three-year period.

2016 was a year of ups and downs, 2017 improved and 2018 took us back to 2015 levels. On average, 0.6 per cent of accounts that traded before material price-sensitive announcements were classified as suspicious. These accounts traded profitably on average 5.1 per cent of the volume before each announcement.

The most suspicious trading was associated with acquisition and merger announcements, and unschedule announcements were more suspicious than scheduled. Announcements by smaller companies were more likely to be dirty.

The number of trading accounts deemed suspicious stayed about the same, however the volume traded by these accounts increased.

Another set of data from Intralinks and Cass Business School from 2018 showed more or less the same findings, with Australia being very clean amongst an international sample of markets from the last decade.

Download REP 487 Review of Australian equity market cleanliness