Sharing confidential information

Definition

sharing confidential information which is potentially price sensitive with others within or outside the firm

Context

When dealers receive large client orders which have potential to influence market price, they may share that information with others within or outside the firm to enable them to front run these client orders.

Employees from competing firms may also share confidential pricing information, for example, on typical spreads or commissions. This is anti-competitive behaviour against anti-trust rules.

Surveillance

Effective implementation of surveillance alerts for sharing confidential information requires capturing the following trade data:

  • communications data

  • order data

Effective surveillance should focus not only on communications data but also on identifying large orders or transaction with high inherent risk of front running. Once such large orders are identified, a targeted communication search can be performed across all possible communication channels including mobile phone and various chat and messaging applications.

Reference

Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street

A great account of the largest insider trading investigation in the history of Wall Street.

  • Nominated for the FT/McKinsey Business Book of the Year
  • Nominated for the Carnegie Medal for Excellence in Nonfiction
  • Amazon Top 5 Business Books of 2017

Risk taxonomy

Parent risks

Regulatory source

FCA FX market wide remediation programme