A well informed market is always better than one driven by speculative rumour. Transparent markets allow accurate transmission of price information to all players on a fair and equal basis. Unfortunately, divining the line between good and bad information is no easy matter when half the participants are talking to each other anonymously in Internet chat rooms.
The Securities and Futures Commission proposal to clamp down on market manipulation by syndicates of speculators using chat sites as forums to spread mischievous rumours is sensible. It follows similar moves in the United States and Australia after 'pump and dump' syndicates were found buying shares before planting rumours in chat rooms and then swiftly unloading as gullible punters jumped on the bandwagon.
Whether such a code can be enforced is another matter. Professional manipulators can easily hide behind untraceable e-mail accounts, while compelling Internet chat services to release individuals' information - such that they have - raises serious privacy issues.
Moreover, the measure smacks of tokenism. Hong Kong's stock market has long run on rumour. Well oiled syndicates have ramped shares after planting rumours for as long as stocks have traded. Yet rarely have regulators brought them to book.
This year's boom in dotcom stocks, and before that the 1996/97 red chip frenzy, saw company insiders and syndicates leak information to spark an upward share price spiral.
Recent years have seen enforcement actions by the commission focus on cleaning up the practices of brokers who ritually traded on their own accounts before placing clients' orders.