Live data from Hacker News

Why Not Insider Trade on Every Company?

bloombergview.com

21–30 of 130 posts

Re: Why Not Insider Trade on Every Company?

#21
post #10

Earlier quoted context omitted.

Why? It's effectively the same action as placing a new order. Cancellations are, for instance, how lots of market makers alter their prices in reaction to events.

If I understand correctly, these are planned orders that are un-planned days if not hours before they go out to the exchange, not orders that are sent to the exchange but cancelled before they can be filled. The latter is what the market makers are doing. So it is more effectively the same as deciding not to do what you have been doing every month. It would be impossible to enforce a prohibition against that, as that…

> It would be impossible to enforce a prohibition against that, as that would effectively be a requirement to sell.

So? That hardly seems impossible to enforce. You just don't allow cancellations unless they are also planned. If you're allowed to schedule recurring sells, say, 30 days in advance (I don't know what the specific rules are), you should only be able to cancel them with 30 days advance notice.

The whole point of the planned trade exemption is to allow trades to happen independent of insider knowledge. If you allow cancellations, you're allowing insider knowledge to impact the trading.

Re: Why Not Insider Trade on Every Company?

#22
post #5

It's actually still possible to perform a specific type of legal insider trading. Example: you are an executive at E Corp and the company will announce its acquisition in two months. You had previously set up planned trades to sell x number of shares each month before then. Because the acquisition is at a premium on the current price, you will make much less money if you go forward with your trades before the announc…

I would not get insider trading advice from Martha Stewart…

[deleted]

Re: Why Not Insider Trade on Every Company?

#23
post #20

Earlier quoted context omitted.

If I understand correctly, these are planned orders that are un-planned days if not hours before they go out to the exchange, not orders that are sent to the exchange but cancelled before they can be filled. The latter is what the market makers are doing. So it is more effectively the same as deciding not to do what you have been doing every month. It would be impossible to enforce a prohibition against that, as that…

> It would be impossible to enforce a prohibition against that, as that would effectively be a requirement to sell. Why would that be impossible to enforce? If you register a planned trade with the SEC you have to follow through with it or pay a fine equal to the amount of money you saved by not going through with it.

that puts SEC employees in the catbird's seat - selling access to those pending trades would pay for a lot of trips to Milan

Re: Why Not Insider Trade on Every Company?

#24
post #12
post #5

It's actually still possible to perform a specific type of legal insider trading. Example: you are an executive at E Corp and the company will announce its acquisition in two months. You had previously set up planned trades to sell x number of shares each month before then. Because the acquisition is at a premium on the current price, you will make much less money if you go forward with your trades before the announc…

That's not insider trading! That's insider cancelling! totally different

Now insider traders will follow in the footsteps of fighting game nerds and obsess over cancels.

Re: Why Not Insider Trade on Every Company?

#25
post #5

It's actually still possible to perform a specific type of legal insider trading. Example: you are an executive at E Corp and the company will announce its acquisition in two months. You had previously set up planned trades to sell x number of shares each month before then. Because the acquisition is at a premium on the current price, you will make much less money if you go forward with your trades before the announc…

That seems a bit of a stretch to call that insider trading.

[deleted]

Re: Why Not Insider Trade on Every Company?

#26
post #5

It's actually still possible to perform a specific type of legal insider trading. Example: you are an executive at E Corp and the company will announce its acquisition in two months. You had previously set up planned trades to sell x number of shares each month before then. Because the acquisition is at a premium on the current price, you will make much less money if you go forward with your trades before the announc…

What was that about how most problems in Computer Science can be solved with an additional level of indirection? Maybe the same is true for Insider Trading? Instead of buying options on the stock of a company, use options on the stock of another company that owns options on the 1st company. Perhaps derivatives have gotten so complicated in recent years as a means of hiding insider trading? (Perhaps there are quants with Comp Sci degrees figuring out ways to make detection of insider trades an NP-Complete problem?)

Re: Why Not Insider Trade on Every Company?

#27

I am wondering if this centralized infrastructure for financial news is actually a good idea. This could always happen again and again. All the employees in these news companies could get a mass of insider information which they could sell. Isn't maybe an alternative decentralized news publishing service a better idea? Couldn't the CEO of a company publish their financial news only on their own website at the given p…

> Why is it necessary for these news to be stored in some central news database

Amusingly it's because of the hedge funds. They want to have a limited list of places to check for news to make sure no one gets there ahead of them.

This is why they were so upset when the Netflix CEO made something public on Facebook -- because they weren't watching his Facebook page for news (but they sure are now!).

The SEC actually has a very limited set of places that you can release financial news because of this.

Re: Why Not Insider Trade on Every Company?

#29
Perhaps someone will change my mind, but I see the block on insider trading and spoofing as harmful to the financial industry overall.

Someone starts shorting a ton of Apple stock? That probably means something big is happen at Apple, and it's not good. It's information.

Spoofing as a technique can be used to combat and inhibit other types of trading, and is in some sense an algorithm to 'keep the opponent honest'.

As best as I can tell, the biggest reason that we as a culture are against insider trading is because 'it's not fair'. (happy to read a response that adds more depth to my understanding). It isn't fair, and the people with insider information are going to make a lot of money. But in the process of making that money they bring the information to everyone else. And insider trading incentivizes knowing as much as possible so that you can have an edge on the competition.

Post reply on HN