Hedge funds use satellite images to beat Wall Street

I remember seeing stories about programmers with access to credit card databases getting indicted for trading on the information. This is a legal version of the same thing, and also probably any attempt to make it illegal would be unenforceable.

‘Outsider information’?

I went to a recruiting talk by Two Sigma a while back where they discussed the same thing as an example of "look at this cool stuff we get to work on". They had slides with satellite images of some parking lot and showed how they could segment cars, deal with car-like things on roofs, map regions of parking lots to the right stores, handle different conditions like snow, etc.

From a technical perspective it's actually an interesting problem because there are so many things to consider. Really makes you notice how disadvantaged retail traders are, though. I think traditionally a lot of hedge fund strategies are kept pretty secret, but this one is so out of reach and technically difficult for most people that they don't really care if it gets out.

One distinction is whether or not there's a duty of confidentiality owed by the possessor of the information with respect to the source of the information (the "non-public" element of "material non-public information"). It doesn't seem here there would be any duty of confidentiality. Presumably the programmers in your example owed a duty of confidentiality to their employer or contract counterparty.

I mean, you don't necessarily have to make it illegal.

1. It's from hedge funds, and you can invest in a hedge fund today and reap the benefits of their strategies yourself

2. There exists a gap right now, where a startup or data analysis firm could provide this kind of information to smaller investors through some kind of subscription model.

3. Ultimately the government itself could "level the playing field" by either gathering this information through other channels and releasing it (BLS or SEC style) or by replicating the strategies and releasing it.

I think #3 could be viable. We already require businesses to share very important and actionable info with the government, and since everyone does it, the risks of one firm having data leaked and another not are mitigated. (SEC requires public reports, BLS takes private data and aggregates it for higher level views) If the government required businesses to report data to them on a weekly or monthly basis regarding things that are being satellite tracked, they could release this information on a set schedule to basically demolish the ability of institutional investors to gain secret information to bet against the public positions