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Why Not Insider Trade on Every Company?

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Re: Why Not Insider Trade on Every Company?

#71

Post by [deleted] »

wavefunction wrote: post #37
javert wrote: post #33

Earlier quoted context omitted.

You are absolutely right. "Insider trading" is like the war on drugs.

Indeed, a slap on the wrist applied very rarely to those white collar criminals unfortunately politically unconnected to face punitive actions and another government initiative that also rarely applies any sort of punishment to the rich and connected. Meanwhile, on the other side of the tracks - snatched some swisher sweets? That's a shootin. Sass me while black? That's another shootin. You got a likky stik of collie…

[deleted]

Re: Why Not Insider Trade on Every Company?

#72

Post by javert »

wavefunction wrote: post #37
javert wrote: post #33

Earlier quoted context omitted.

You are absolutely right. "Insider trading" is like the war on drugs.

Indeed, a slap on the wrist applied very rarely to those white collar criminals unfortunately politically unconnected to face punitive actions and another government initiative that also rarely applies any sort of punishment to the rich and connected. Meanwhile, on the other side of the tracks - snatched some swisher sweets? That's a shootin. Sass me while black? That's another shootin. You got a likky stik of collie…

> Indeed, a slap on the wrist applied very rarely to those white collar criminals unfortunately politically unconnected to face punitive actions and another government initiative that also rarely applies any sort of punishment to the rich and connected.

I don't believe this is even remotely accurate.

> Meanwhile, on the other side of the tracks - snatched some swisher sweets? That's a shootin. Sass me while black? That's another shootin. You got a likky stik of collie and minoritous in nature? You going down: hard!!!

I don't deal with sarcasm and vulgarity. If you want to make a point, make it politely and directly.

Re: Why Not Insider Trade on Every Company?

#73

Post by hueving »

rayiner wrote: post #38
stevewepay wrote: post #36

Earlier quoted context omitted.

Politicians in Congress are explicitly allowed to insider trade based on information they hear about. This is why congressmen's stock portfolios are far more profitable than an average person's.

It makes sense to insulate Congressman from insider trading charges. They are exposed to so much inside information that the executive could bring charges against them on a whim. Which would have significant separation of powers concerns. Of course, the answer to that is to require all Congressmen to put their assets in a blind trust.

It makes sense if an idiot were to come up with a solution in 5 seconds.

The answer is NOT to give them free reign to do it. It's to prevent them from being allowed to choose stock investments entirely. They get enough perks, they don't need free reign over the market.

Re: Why Not Insider Trade on Every Company?

#74

Post by hueving »

mmanfrin wrote: post #40
cespare wrote: post #11

Earlier quoted context omitted.

So a "trade canary", then.

I wonder if it would be possible to track the continual sales of stock by large shareholders, use that to buy options based on the canary trades disappearing. This would then lead to the question: am I an insider trader if I am basing my options off of the lack of sales of insiders?

Their sales are very sporadic so it's not as reliable as you would think. Sometimes they need cash to pay for a new house, hitmen, etc. Other times they let the stock vest for longer because they don't need the money.

Re: Why Not Insider Trade on Every Company?

#75

Post by bsbechtel »

martey wrote: post #63
stevewepay wrote: post #36

Earlier quoted context omitted.

Politicians in Congress are explicitly allowed to insider trade based on information they hear about. This is why congressmen's stock portfolios are far more profitable than an average person's.

Doesn't the STOCK Act ( https://en.wikipedia.org/wiki/STOCK_Act ) explicitly ban Congresspeople from insider trading? The only study on the performance on Congressional stock portfolios is from 2004 [1]. Do you know of any post-STOCK studies? [1]: Ziobrowski, A.J., Cheng, P.X., Boyd, J.W., and Ziobrowski, B.J. (2004) “Abnormal Returns from the Common Stock Investments of Members of the United States Senate.” Journal…

I'm pretty sure the key provisions of the STOCK Act were repealed the same weekend as the Boston Marathon Bombings. See the amendment section of the Wikipedia article you linked to.

Re: Why Not Insider Trade on Every Company?

#76

Post by mfisher87 »

Taek wrote: post #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'. A…

OK, good idea. Let's make insider trading legal... now NSA employees win and everyone else loses. Seems like a sensible economic system.

Re: Why Not Insider Trade on Every Company?

#77

Post by mmanfrin »

hueving wrote: post #74
mmanfrin wrote: post #40

Earlier quoted context omitted.

I wonder if it would be possible to track the continual sales of stock by large shareholders, use that to buy options based on the canary trades disappearing. This would then lead to the question: am I an insider trader if I am basing my options off of the lack of sales of insiders?

Their sales are very sporadic so it's not as reliable as you would think. Sometimes they need cash to pay for a new house, hitmen, etc. Other times they let the stock vest for longer because they don't need the money.

Continual sales, I mean -- large owners of big companies often have recurring monthly sales of x number of shares. Deviation from this is notable, and a possible source of information.

Re: Why Not Insider Trade on Every Company?

#78

Post by martey »

bsbechtel wrote: post #75
martey wrote: post #63

Earlier quoted context omitted.

Doesn't the STOCK Act ( https://en.wikipedia.org/wiki/STOCK_Act ) explicitly ban Congresspeople from insider trading? The only study on the performance on Congressional stock portfolios is from 2004 [1]. Do you know of any post-STOCK studies? [1]: Ziobrowski, A.J., Cheng, P.X., Boyd, J.W., and Ziobrowski, B.J. (2004) “Abnormal Returns from the Common Stock Investments of Members of the United States Senate.” Journal…

I'm pretty sure the key provisions of the STOCK Act were repealed the same weekend as the Boston Marathon Bombings. See the amendment section of the Wikipedia article you linked to.

The amendment makes it significantly more difficult to detect insider trading (since financial disclosure reports are not available online), but I wouldn't describe it as a repeal of the law's "key provisions". See http://www.npr.org/sections/itsallpolitics/2013/04/16/177496... :

"Still, two major elements of the law remain. Insider trading is illegal, even for members of Congress and the executive branch. And for those who are covered by the now-narrower law, disclosures of large stock trades are required within 45 days."

Re: Why Not Insider Trade on Every Company?

#79

Post by daemin »

joe_the_user wrote: post #39
Taek wrote: post #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'. A…

The thing that I think neither you nor this article get is that insider trading bans are criminal penalties that merely supplement a person's civil employment contract. That is, nearly everyone who is given insider information as part of their condition of employment is implicitly or explicitly given it on the condition that they don't exploit it. I'm pretty radically against copyrights and such but I don't think any…

Yeah, usually there's defined windows in which employees can trade in the companies shares.

Re: Why Not Insider Trade on Every Company?

#80

Post by eitally »

defen wrote: post #7
nostromo wrote: 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…

Are planned trades by insiders public information? Or are they only made public when the actual trade occurs?

The thing that confounds the situation a bit, for a large quantity of people, is that in certain industries and in certain roles, a huge number of people are considered insiders. For example, anyone at a corporation who can access sales or booking data is an insider ... including the poor CRM administrator in IT or the exec admin in the Sales office. Beyond that, though, in financial services firms it's entirely possible they might consider all employees insiders on all equities. Fidelity does this, for example, and they additionally require all employees' equity holdings solely to exist in Fidelity-managed accounts so they can actively audit for insider activity.

This second case seemed more nutso to me than the first, but both are true -- I've lived them.

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