The Financial Services Authority, the UK's financial regulator, said eight people were arrested on Tuesday, including employees of UBS AG and J. P. Morgan Cazenove, as part of an investigation into insider dealing.
In a brief statement, the FSA said a team of 40 of its staff, backed by officers from the City of London police, had also searched premises across the region.
A spokeswoman for the FSA said only that the people arrested were men, aged 27 to 48, and declined to comment further.
The Wall Street Journal reports that those arrested were people who worked in the banks' back offices and their friends -- not traders or bankers -- and the sums allegedly involved were in the hundreds of thousands of pounds. It isn't clear what their duties were. Back-office employees at large banks often help process trades as well as handle information on potential transactions.
The FSA has hardened its stance on financial crime, after long being accused of not doing enough to tackle insider dealing and market abuse -- both notoriously difficult to prosecute.
Until earlier this year, it had not brought a single criminal case for insider dealing since it took over responsibility for prosecutions in 2001.
But the watchdog currently has three insider dealing cases involving a total of five defendants before the courts, the FSA spokeswoman said.
Earlier this month, the FSA also imposed an 85,000 pound ($169,100) fine on a former Body Shop IT worker who obtained advance knowledge of the beauty retailer's worse-than-expected sales performance over Christmas 2005, and used the information to bet on a fall in the group's share price once the figures were published.