Market abuse includes any misuse of confidential or non public information so as to attempt to gain a trading advantage.
Market abuse also encompasses:
- Insider dealing.
- Improper disclosure.
- Manipulating transactions.
- Manipulating devices.
- Misleading dissemination.
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.
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.