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.
Market Cleanliness (MC)
The MC statistic methodology was updated in November 2024. Details about the changes implemented are described in Research Note: A revision of our market cleanliness statistic methodology[1]. Methodological changes mean that the statistic is not comparable to, and systematically higher than, figures published using the previous methodology.
From this year, we will publish the MC statistic according to the updated methodology only.
The MC statistic for 2024 was 37.8%. The 5-year moving average was 32%.
The MC statistic is just one indicator of possible insider dealing. Despite recent improvements, it continues to have limitations as a broader measure of market cleanliness. In particular, it only captures instances where a takeover offer announcement has caused a positive abnormal price movement in the 2 days preceding the news. On the one hand, not all insider trading results in a price impact during this period. On the other, price moves could have been caused by financial analysts or the media correctly predicting likely takeover targets.
It is for these reasons that we also monitor a range of additional indicators.
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Data table
Abnormal Trading Volume
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 2024 was 5.6%. This is the same level as in 2023. We remained in a period of elevated market volatility, driven by global events, which could have affected the ATV measure. This is based on observing abnormal increases in trading volumes in 89 out of 1585 announcements.
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. Volumes can fluctuate for many reasons, but it is an indicator that market abuse may have occurred.
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Data table
Potentially Anomalous Trading Ratio
Potentially Anomalous Trading Ratio (PATR) is part of our work to broaden the number of indicators to help assess market cleanliness.
The 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 2024 was 4.1% which represents a small increase from 3.3% in 2023.
It is important to understand this ratio in the context of the overall level of trading considered for this measure. Some 99.4% of trading activity did not occur during a sensitive time period. For example, not preceding a potentially price sensitive news announcement where the price did move significantly. For the 0.6% of trading activity that justified further review, only 4.1% of that trading was considered potentially anomalous – a very small percentage of overall UK trading activity.
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Data table
Further Metrics
We currently use these 3 metrics to track the cleanliness of the markets. However, we are always looking to improve how we measure our fight against market abuse and the protection of market integrity. Work is underway on developing additional metrics to measure the cleanliness of our markets.
