What is Insider Trading in Share Market?

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Feb 20, 2023

Insider trading refers to the buying or selling of a security (e.g. stocks, bonds, or options) by someone who has access to material non-public information about the security. This information is not available to the general public and could potentially impact the market price of the security. Insider trading is illegal in many countries, including the United States and the United Kingdom, because it provides an unfair advantage to those who have access to the non-public information, potentially affecting the fairness of the market.

For example, an insider of a company may have access to information about the company’s financial performance before it is made public, and could use this information to make a profit by buying or selling the company’s stock. This type of trading undermines the trust of investors in the market, as it creates an environment where some individuals have access to privileged information that gives them an advantage over others.

It is important to note that not all insider trading is illegal. For example, some insiders are allowed to trade their company’s securities if they follow specific rules, such as reporting their trades to the appropriate regulatory authorities and not trading during certain periods.