What is a significant advantage of using SEDI?

• A. It reduces trading costs significantly
• B. It increases the transparency of insider trading
• C. It facilitates faster trading transactions
• D. It allows for anonymous trading of securities

Answer: (B)

Using SEDI (System for Electronic Disclosure by Insiders) significantly enhances the transparency of insider trading. This system is designed to provide a reliable and accessible platform where insiders, including executives and directors, are required to report their trades in a timely manner. By making these disclosures public, SEDI allows investors and regulators to monitor insider trading activities, creating an environment of accountability.

When insider trading is transparent, it helps maintain market integrity because investors are informed about potential conflicts of interest and can make better-informed decisions based on the trading activities of company insiders. This transparency fosters investor confidence and contributes to overall market fairness by ensuring that all participants have access to the same information.

In contrast, while factors like trading costs, transaction speed, and anonymity can be important in trading, they do not capture the primary purpose and benefit of SEDI, which is specifically aimed at promoting transparency in the context of insider trading.