Mary Schapiro, Chairman of the American Securities & Exchange Commission, delivers the keynote address at the New York Financial Writers' Association annual awards dinner in New York June 18, 2009.
Mary Schapiro, Chairman of the American Securities & Exchange Commission, delivers the keynote address at the New York Financial Writers' Association annual awards dinner in New York June 18, 2009. Schapiro is now defending the SEC exemption from FOIA requests. REUTERS

The Securities and Exchange Commission is investigating whether exchange-traded funds are being used to hide insider trading, according to the Financial Times.

ETFs have emerged as one possible way of maximizing gains in a single stock while camouflaging trading patterns, according to the report. A trader with inside information about a stock could, for example, buy an ETF that includes that stock and short the other stocks in the ETF, the FT reported.

Such 'ETF-stripping' would allow a trader to profit from a stock without directly buying or selling the stock, according to the report.

U.S. regulators are also investigating whether traders are using swaps to mask insider trading patterns, according to the report.

SEC Insider trading Regulatory Agency | SEC Investment