Commentary: Closing loopholes on insider trading

When is insider trading an offence? At the moment, only in cases where somebody trades in a corporate security using inside knowledge of the company concerned. That makes much of the talk last week about insider trading in the gilts, sterling futures and foreign exchange markets irrelevant. There would probably have been regulatory breaches if investors traded on the basis of prior information about the Government's foreign borrowing plans, but it would not have been an insider dealing offence.

However, as a result of a European directive there will soon be new legislation to widen the definition of the offence of insider trading. It will come from the Treasury, which has taken over political responsibility.

The treatment of government economic information will be covered in the new legislation. But, according to City experts, it will be extremely unlikely that the government will be able to devise a formula to make trading on the basis of leaks of economic news unlawful.

The problem is the difficulty of establishing a link between the information and the price movement. But the Treasury should have a go, and at least try to widen the offence to other securities: somebody who buys gilts on the basis of a leak really should be culpable.

One change that is on the cards is to widen the definition of corporate security. It is not now illegal to buy shares in a company on the basis of a leak of the plans of - for example - one of its fierce rivals. The information nevertheless affects both companies' shares. That loophole will go.