Each year we publish a Market Cleanliness (MC) Statistic for takeover announcements in the UK equity markets. This is defined as the proportion of corporate takeover events for which we observed a significant abnormal movement in share price before the takeover announcement.
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Data table
The MC Statistic for 2020 was 21.9%. While this represents an increase from the previous year, it is difficult to draw meaningful conclusions from year-on-year changes. The MC statistic is one indicator of possible insider dealing, but it has several shortcomings as a measure of broader market cleanliness, especially given the fall in sample size over the past decade. The episode of high volatility after the coronavirus (Covid-19) shock in March 2020 could have had a material impact on the MC Statistic for this year. Price moves before takeover announcements could have been identified as abnormal during this stress period but may simply reflect market conditions. Other factors can influence the statistic, such as financial analysts or the media correctly assessing likely takeover targets or significant legitimate trades that fall before an announcement. Hence, we also monitor additional indicators.
Abnormal Trading Volume (ATV)
Each year we publish an Abnormal Trading Volume (ATV) Measure. This looks for abnormal increases in trading volumes ahead of potentially price sensitive announcements, covering equity instruments and some equity derivatives.
The ATV measure for 2020 was 8.0%. This is an increase when compared to 2019, however the period of market stress after the coronavirus shock in March 2020 could have affected the ATV measure for this year. This is based on observing abnormal increases in trading volumes in 249 out of 3126 announcements tested.
The existence of announcements where we have found statistically significant increases in volumes, does not mean that market abuse occurred before each of those announcements, as volumes can fluctuate for a variety of reasons, but it is an indicator that market abuse may have occurred.
|
Period |
Quarterly |
Yearly |
|---|---|---|
|
2018-1 |
6.2% |
|
|
2018-2 |
6.7% |
|
|
2018-3 |
6.7% |
|
|
2018-4 |
5.5% |
|
|
2018 - Full |
6.4% |
|
|
2019-1 |
5.1% |
|
|
2019-2 |
7.7% |
|
|
2019-3 |
4.5% |
|
|
2019-4 |
7.2% |
|
|
2019 – Full |
6.4% |
|
|
2020-1 |
9.1% |
|
|
2020-2 |
7.3% |
|
|
2020-3 |
6.9% |
|
|
2020-4 |
7.5% |
|
|
2020 - Full |
8.0% |
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Data table
Potentially Anomalous Trading Ratio (PATR)
Last year we introduced the Potentially Anomalous Trading Ratio (PATR) as part of our work to broaden the number of indicators to help assess market cleanliness.
The new measure looks at potentially anomalous trading that occurs ahead of a price sensitive news announcement. By potentially anomalous trading we mean:
- the participant does not typically trade in this instrument
- the participant traded significantly more in the direction of the announcement
- the participant made a significant profit from trading positions established in the period immediately prior to the announcement
The PATR for 2020 was 6.9% which represents a small increase from 6.7% in 2019.
It is important to understand this ratio in the context of the overall level of trading considered for this measure. Our analysis revealed 98.7% of trading activity did not occur during a sensitive time period (eg not preceding a potentially price sensitive news announcement where the price did move significantly). For the 1.3% of trading activity that justified further review, only 6.9% of that trading was considered potentially anomalous – a very small percentage of overall UK trading activity.
|
Period |
Quarterly |
Yearly |
|---|---|---|
|
2018-1 |
4.5% |
|
|
2018-2 |
7.3% |
|
|
2018-3 |
5.1% |
|
|
2018-4 |
6.2% |
|
|
2018 - Full |
6.1% |
|
|
2019-1 |
9.8% |
|
|
2019-2 |
8.3% |
|
|
2019-3 |
4.4% |
|
|
2019-4 |
5.8% |
|
|
2019 – Full |
6.7% |
|
|
2020-1 |
7.3% |
|
|
2020-2 |
5.7% |
|
|
2020-3 |
8.6% |
|
|
2020-4 |
6.5% |
|
|
2020 - Full |
6.9% |
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Data table