The FSA has reportedly begun investigating the use of credit default swaps as a vehicle for insider trading, requesting information about the possibility of using the derivatives to carry out market abuse in the first instance of a crackdown on insider trading in these types of products.

It is understood that the FSA's investigation is part of a wider review of insider dealing practices, however it marks a new frontier in the regulator's battle against trading on illegal tips, which had previously focused on the buying and selling of shares, Bloomberg reports, citing four sources familiar with the investigation.