Market sounding is the communication of information, prior to the announcement of a transaction, in order to gauge the interest of potential investors in a possible transaction.  Market sounding can be made by a number of entities, including issuers and third parties acting on behalf issuers.1

Under UK MAR, a disclosing market participant (DMP) may disclose inside information to a market sounding recipient (MSR) if: (1) it is a market sounding and (2) the DMP:

  • considered whether the market sounding would involve the disclosure of inside information and kept a record of the reason for its determination;
  • obtained the consent of the MSR to receive inside information;
  • informed MSR that he is prohibited from using the information to cancel or amend an order, or acquire or dispose of a financial instrument relating to the information; and
  • informed MSR that he is obliged to keep the information confidential.2


The DMP must retain a record of all information given to the MSR, which must be provided to the Financial Conduct Authority on request.  Separately, the MSR should assess for itself whether it is in possession of inside information or when it ceases to be in possession of inside information.3  Further detail is contained in MAR Level 2 regulations, as retained in the UK by the FCA’s Technical Standards (Market Abuse Regulation) (EU Exit) Instrument 2019 (2019/45) and ESMA guidance, available here and here, respectively.

1 Regulation 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) (MAR), as retained in the UK by the European Union (Withdrawal) Act 2018 (EUWA) and amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019/310, art. 11.

2 Id., art. 11(5).

3 Id., art. 11(7).

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