A WORLD-LEADING system is being developed in the North-East which could help eradicate insider trading fraud on the stock markets.

The software, named Cassandra (Computerised Analysis of Stocks and Shares for Novelty Detection of Radical Activities), is being developed to detect fraud almost instantly by analysing share prices alongside the news.

Research has suggested that as many as 25 per cent of UK share dealing may be tainted by insider trading, with that figure rising to as high as 41 per cent in the US.

Now, researchers at the University of Sunderland say that by constantly monitoring news surrounding a company, particularly those that may be subject to a major development, it could help explain significant movements in its share price and crack down on fraud. And after piloting the initial programme, a larger system is planned which could even help detect misleading news stories.

Dr Dale Addison, Cassandra project manager, said: “The stock market is highly volatile with stocks and shares going up and down all of the time, and sometimes there is a perfectly rational explanation for these fluctuations.

“With Cassandra, we think we have a technique which has identified a gap in the market.

“The system looks at the news stories which may affect a particular company.

“So, if two companies are in the process of a merger and someone gets wind that the merger isn’t going to go ahead, a key player will go out and buy or sell stock shares and make a killing on the markets.

“Using our system, that information may be detectable by analysis of news.”

Dr Addison said plans were already in place for the second phase of the Cassandra programme.

“We have plans to develop a larger system which will allow Cassandra to tackle not just insider trading but also larger issues which are related to market abuse such as false, exaggerated or highlymisleading news stories released by individuals or groups,” he said.

“Such stories can massively influence the markets, and yield huge profits for unscrupulous traders.

“If successful, Cassandra will make it more difficult for unscrupulous traders to make a killing on the stock market at the expense of others.”

The system, which has seen North-East academics work alongside Canadian company Measured Markets, has been backed by £90,000 from North- Star Equity Investors to help take it to market.