Market abuse and Market value added: Difference between pages

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Market abuse includes any misuse of confidential or non public information so as to attempt to gain a trading advantage.  
(MVA). The excess of the actual or theoretical market value of a firm over its book value.


Taking a simplified example, for an all-equity financed firm with an actual or theoretical market capitalisation of $130m and book value of equity $100m:
MVA = $130m - $100m = $30m.


Market abuse also encompasses:
In practice a number of adjustments would be made both to the market values and to the book values used in the calculation of the MVA.
# Insider dealing.
# Improper disclosure.
# Manipulating transactions.
# Manipulating devices.
# Misleading dissemination.


So in practice the assessment of MVA is both more complicated, and arguably more subjective, than the simple calculation illustrated above.


For example trading in a company's shares whilst in the possession of inside information that a profits warning was about to be announced would be insider trading and therefore market abuse.
== See also ==
* [[Book value]]
* [[Economic value added]]
* [[Excess Return]]
* [[Market value]]
* [[Shareholder value]]


==Legislation==
Legislation exists in most financial markets to specify the detail of what is prohibited as market abuse and within the EU this was covered by the Market Abuse Directive (Directive 2003/6/EC).
The Market Abuse Directive (MAD) was revised and replaced by MAD II which widens its scope to include new markets and instruments.
The Market Abuse Regulation (MAR) and the Directive on Criminal Sanctions for Market Abuse (CSMAD) form the legislative proposals which make up MAD II.
MAD II came into force in July 2016.
==See also==
* [[Confidential information]]
* [[Fair market]]
* [[Insider dealing]]
* [[Market Abuse Regulation]]  (MAR)
* [[Market manipulation]]
* [[UK MAR]]
==Other links==
*[http://www.treasurers.org/node/3244 ACT briefing note: The New Market Abuse and Disclosure Regime in the UK - A Guide for Listed Companies; 2005]
*[http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014R0596 MAR]
*[http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0057 CSMAD]
[[Category:Self_management_and_accountability]]
[[Category:Ethics]]
[[Category:Financial_risk_management]]

Revision as of 14:20, 23 October 2012

(MVA). The excess of the actual or theoretical market value of a firm over its book value.

Taking a simplified example, for an all-equity financed firm with an actual or theoretical market capitalisation of $130m and book value of equity $100m: 

MVA = $130m - $100m = $30m.

In practice a number of adjustments would be made both to the market values and to the book values used in the calculation of the MVA.

So in practice the assessment of MVA is both more complicated, and arguably more subjective, than the simple calculation illustrated above.

See also


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