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Why Not Insider Trade on Every Company?

bloombergview.com

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Re: Why Not Insider Trade on Every Company?

#81

Post by ThrustVectoring »

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…

It's harmful to the industry overall, since it prevents people from executing trades to help correctly price companies.

We should still discourage and ban it. Outside of what the market as a whole does, there's still the question of who benefits from it. Insider trading incentivizes some shitty behavior and some pretty major principle-agent problems.

Re: Why Not Insider Trade on Every Company?

#82

Post by Taek »

mfisher87 wrote: post #76
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.

You joke, but trading on insider information means revealing that information. It gives people 2 incentives:

1. Trade on your insider information quickly, or someone will beat you to it 2. Keep your secrets safer.

It also makes the NSA vulnerable to false planted information. Trading on stolen information means trusting that information.

Re: Why Not Insider Trade on Every Company?

#83

Post by hchenji »

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…

ELI5...why would you sell shares that you know will increase in value? Or does this have something to do with options.

Re: Why Not Insider Trade on Every Company?

#84

Post by marme »

hchenji wrote: post #83
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…

ELI5...why would you sell shares that you know will increase in value? Or does this have something to do with options.

he is talking about canceling a pending sale of stock. When you are an executive or board member of a company you are not allowed to just buy and sell large amount of stock on a whim you must setup buying and selling plans to spread the trades out over weeks or months.

So in this case you had a sell order planned over the next few months but now you know the shares will increase in value after the date of the scheduled sale so you cancel the sell plan. This is considered legal because you did not use your insider information to actually trade stock only to refuse to trade stock

Re: Why Not Insider Trade on Every Company?

#85

Post by myblake »

tokenadult wrote: post #6

I think I will end up upvoting every share of this Bloomberg View columnist's columns here on Hacker News. The author, Matt Levine, thinks like a hacker in the best sense, by pushing ideas to their extremes and seeing what the consequences might be. He adopts a humorous tone, but his columns are full of food for thought. http://www.bloombergview.com/contributors/matt-levine

Yeah seriously he's incredibly smart and funny.

Re: Why Not Insider Trade on Every Company?

#86

Post by marme »

eitally wrote: post #80
defen wrote: post #7

Earlier quoted context omitted.

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 poss…

at amazon virtually everyone is considered an insider because almost everyone has access to the sales graphs that are used to track the health of the website and you can see detailed graphs of the revenue which only become public during the quarterly announcements. Basically anyone who had a company computer had access to this info so you were only allowed to trade amazon stock for like 15 days after each quarterly announcement. HR would send out emails saying when the allowed trading periods began and ended

Re: Why Not Insider Trade on Every Company?

#87

Post by peejaybee »

eitally wrote: post #80
defen wrote: post #7

Earlier quoted context omitted.

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 poss…

A large swath of people where I worked a couple of jobs back were considered "covered portfolio persons" who had to pre-clear trades in all but a few classes of securities (basically open-ended mutual funds, and small trades in very large-cap equities) and report almost everything. We had to instruct any brokerage firms to send quarterly reports to our compliance department.

I don't know if everybody was covered, but everybody in my group was.

Re: Why Not Insider Trade on Every Company?

#88

Post by bbcbasic »

raisincakes wrote: post #43
bbcbasic wrote: post #32

Then there is the story of the really sophisticated guys who didn't get caught. Unfortunately that's a story you won't be reading online, but will just have to imagine. It really makes me question the sanity of doing this illegal trading. For as much effort you could do something legal and make money. Maybe not as much but surely without the risk of going to prison.

Sadly, insider trading is pervasive on wall street. You don't read about the guys that don't get caught, and there are a lot of them. Remember, if you can't spot the sucker at the table, you're the sucker. That's why I keep my money far away from the stock market except for index funds.

> That's why I keep my money far away from the stock market except for index funds.

I think the sucker at the table is the amateur day trader who thinks they can out-smart the market, but really they are gambling.

On the other hand spotting an undervalued stock and buying it and holding for the long term, especially with a portfolio to protect you isn't too suckerish and should be quite immune from whatever the insider traders and high frequency algo guys are doing.

Re: Why Not Insider Trade on Every Company?

#89

Post by pdeuchler »

jedberg wrote: post #27
nomailing wrote: post #18

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 h…

I was under the impression that it was because financial news is an extremely sensitive business. Twitter has the power to move the market now, and we already know the damage simple, fake websites can do[0]. There's a lot of power in publishing public financial information (as the article demonstrates) and that is why we have regulation. People need confidence in their information if they are to have confidence in their market.

[0] http://www.theverge.com/2015/7/14/8962433/fake-bloomberg-new...

Re: Why Not Insider Trade on Every Company?

#90

Post by harmegido »

javert wrote: post #72
wavefunction wrote: post #37

Earlier quoted context omitted.

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? Th…

He's right though. Nearly a quarter of african americans in Florida are not allowed to vote - thanks in large part to the war on drugs, (well, and probably racism).

Meanwhile, relatively very few people go to jail for insider trading. The number of cases in the past 10 years is probably in the hundreds, possibly thousands. Compared to hundreds of thousands of drug cases (maybe millions?).

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