New Gekkos Riding the Merger Wave

"Confidential information is all over, with the sheer numbers of people that have been hired recently to get all these deals done," says Donna Hitscherich, a professor of economics and finance at Columbia University and a former investment banker. "There are just so many avenues for information."

Start with people working at investment banks and law firms, and consider that there have been "even some cases where information has been stolen from the printers," Ritts adds.

Options trading has also come under scrutiny in deals including Murdoch's Dow Jones bid and last month's private-equity buyout of First Data(FDC Quote).

Besides equities and options trades, insider trading could also show up in the increasingly popular credit default swaps. The derivative instruments are contracts under which a Wall Street bank or other so-called counterparty agrees to pay a bondholder in the event of a default.

A study last year found increased trading activity in the market for so-called credit default swaps on several buyout targets, causing some to believe that this trading activity was done on knowledge that an impending LBO was coming.

Michael Greenberger, a professor at the University of Maryland Law School and a former director of trading and markets for the Commodity Futures Trading Commission, says inside trading within credit derivatives is the area that has proven to be the trickiest for regulators.

While the New York Stock Exchange(NYSE Quote) and the Nasdaq Stock Market(NDAQ Quote) play a key role in helping regulators sniff out abnormal trading through the exchanges, "if the information is gathered from OTC derivatives market, those markets are very opaque to the federal government," he says.