Exchange clamp on City insider leaks

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The Stock Exchange yesterday announced tougher measures aimed at reducing the disruption to markets from leaked price-sensitive information.

Michael Lawrence, the exchange's chief executive, said there would be increased usage of share price indication to let the market know an announcement was pending, as well as the authority temporarily to halt trading in a share.

He stressed that preserving an orderly market was essential to defending London's reputation in an increasingly competitive financial environment.

The exchange has come under persistent criticism in recent years for its perceived ineffectiveness in controlling dramatic surges in a share price, usually when information has leaked to the market in the run-up to a bid.

The Stock Exchange had already begun to adopt a more aggressive approach, as when it telephoned SG Warburg last December and forced out the announcement of the merger talks with Morgan Stanley. The exchange said the new measures would encourage companiesto make timely announcements to the market when it is evident that price-sensitive information has leaked.

By making a share indicative, which will immediately flash up on trader's screens, the exchange will be informing market-makers that a price-sensitive announcement is pending, and that they may want to wait before dealing. If, after declaring a share indicative, the company still feels unable to make an announcement, the exchange has the right to impose a 24-hour trading halt as a last resort. The exchange said it would be clear that such a halt is different from a suspension, which usually presages badcompany news.

Mr Lawrence said: "Preserving London's reputation as a respected international financial centre is essential. I am determined that the exchange has effective arrangements in place to maintain that reputation and that it is not damaged by people taking advantage of privileged information."

The Stock Exchange said yesterday's measures should help to deter insider trading, by isolating the initial activity. The exchange said the real effect of the measures would lie in their threat, and that the need actually to halt share trading should occur only rarely.