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> The main reason we don't like insider trading is that we like participation in the market by relative amateurs. A system that allows insider trading discourag
by rodgerd 11y ago
> The main reason we don't like insider trading is that we like participation in the market by relative amateurs. A system that allows insider trading discourages participation by amateurs, because they do not have insider information.
While I agree with that in theory, in practise we see that the rest of the market is so hopelessly skewed in favour of insiders in one form or another it's like a sticky plaster on the stump of a severed leg; just look at the Facebook IPO, or high frequency trading.
- tajen 11y agoHFT: I've never understood why stock is traded on a continuous time. In NYC there's a famous crossroad where banks have IT offices, because they want to be as close as possible to the stock exchange's servers, because 50ms latency difference can make them earn a few millions per year. If stock were traded discretely, like every 3 minutes or so, we would allow bids to pile up, and HFT and closer banks wouldn't have an advantage over more remote clients.
- dllthomas 11y agoIf stock were traded discretely, like every 3 minutes or so, it would probably reduce the effect. But a faster turn around would still be an advantage - right before the trade happens you can make up your mind based on more information than others have. One thought might be to partly counteract that with a transaction cost that rises over the course of the 3 minutes.