What effect does insider dealing have in terms of market integrity?

Insider dealing, which involves trading based on non-public, material information about a company, significantly disrupts fair trading conditions in the market. When individuals exploit confidential information to gain an advantage, it undermines the principle of a level playing field where all investors have equal access to relevant information. This practice creates an environment of unfairness and distrust among market participants, as those without insider knowledge are unable to compete equitably.

The existence of insider trading can deter investors from participating in the market, as they may feel that their chances of success are compromised in an environment tainted by unfair advantages. This erosion of trust can lead to lower participation in the market, decreased liquidity, and ultimately a lack of confidence in the overall integrity of the financial system.

In contrast, the other options suggest positive impacts that insider dealing does not align with. Enhancements to transparency, promotion of responsible investment, and increases in market efficiency are all characteristics associated with a fair and well-regulated market. Insider dealing fundamentally contradicts these values, reinforcing the notion that it severely compromises market integrity.