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14 July (AFR) – ‘Dog’ stocks boost illegal trading

[COMMENT: A report from an academic in Sydney regarding the low-liquidity stocks, and some suggestions of excessive “insider trading”…]

(14 July 2012, AFR, p5, John Kehoe)

‘Insider trading is worse in Australia than in most other developed countries because of too many small stocks listed on the stock exchange, a University of NSW academic has found.’

‘Michael Aitken, chair of capital market technologies at UNSW’s Australian School of Business, said the problem could be limited by requiring that the names of brokers’ clients who buy and sell shares to be disclosed.’

‘ “If they did that, identifying insider trading would be like shooting fish in a barrel,” he said.’

‘Dr Aitken found that trading in the top 50 stocks was fair and efficient, but the local market was let down by the remaining 1100 stocks, many of which were small and illiquid.’

‘ “Some of these stocks are lucky to trade every day, some of them are lucky to trade in a week,” Dr Aitken said. “If you happen to do a trade . . . you’re most likely to be trading with an informed trader like a director of the company.” ‘

Read the full article at AFR.com (might need AFR login access)

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