What constitutes insider trading?

Insider trading refers to the buying or selling of securities based on material, non-public information about a company. This type of trading is illegal in most jurisdictions because it undermines investor confidence in the fairness and integrity of the securities markets. The key aspect of insider trading is that the trader has access to knowledge that is not available to the general public, providing them with an unfair advantage over other investors.

In this context, trading based on non-public, inside information is the hallmark of insider trading. Such information may include undisclosed earnings reports, upcoming mergers or acquisitions, or other sensitive data that could influence a company's stock price. Engaging in trades on the basis of this privileged information can result in severe legal penalties, including fines and imprisonment.

Meanwhile, trading based on public information, trades not influenced by corporate knowledge, or trading exclusively during business hours do not involve the type of unfair advantage that characterizes insider trading. Public information is available to all investors, and therefore does not constitute insider trading. Similarly, trades that are not influenced by corporate knowledge reflect transparent trading practices, while the timing of trades during business hours does not relate to the legality of the trading information itself.