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But there's also bad incentives tied to it - with inside information, you're incentivized to keep others in the dark so that you can maximize the impact of your

But there's also bad incentives tied to it - with inside information, you're incentivized to keep others in the dark so that you can maximize the impact of your trades. Things like borrowing money to short stocks in a company likely to go bankrupt, while telling people to buy.

evanpw 11y ago
> with inside information, you're incentivized to keep others in the dark so that you can maximize the impact of your trades This is true of all professional trading. > borrowing money to short stocks in a company likely to go bankrupt, while telling people to buy This would be fraud, which is illegal independently of any insider trading rules
- baddox 11y ago
  Why does borrowing money in any way diminish the positive effect of making the stock price more reliable? And how does the incentive to lie to other traders apply only to insider trading? It seems like that would always apply to all trading.
  - Natanael_L 11y ago
    Like I replied to another comment, should judges be allowed to trade on information about judgements he has yet to deliver?
    - giaour 11y ago
      That sounds like a question for a professional ethics board. I would assume a judge caught doing that would be sacked, disbarred, and publicly shamed, even if everything he did was strictly legal. "Wrong" doesn't automatically mean "criminal."
    - baddox 11y ago
      I don't think so, but I think that could be handled on the side of the court, not the side of the exchange. It could certainly be illegal, or at least a disbarrable offense, for a judge to use his or her knowledge for personal gain. Likewise, many of the most flagrant examples of insider trading could be covered under trade secret or contract law, like a CEO shorting his or her company then purposefully sabotaging it.
JacobH 11y ago
Telling people to buy stock you shorted is a bad idea. You're goal is for the stock to go lower.
- Natanael_L 11y ago
  > bankrupt Should deal with that
- lmm 11y ago
  Yeah but conversely you want to talk the price up before you lock in your short so that you get in at a better price.
eru 11y ago
> Things like borrowing money to short stocks in a company likely to go bankrupt, while telling people to buy. It's a dick move, but seems perfectly legal.

evanpw 11y ago

> with inside information, you're incentivized to keep others in the dark so that you can maximize the impact of your trades This is true of all professional trading. > borrowing money to short stocks in a company likely to go bankrupt, while telling people to buy This would be fraud, which is illegal independently of any insider trading rules

baddox 11y ago
Why does borrowing money in any way diminish the positive effect of making the stock price more reliable? And how does the incentive to lie to other traders apply only to insider trading? It seems like that would always apply to all trading.
- Natanael_L 11y ago
  Like I replied to another comment, should judges be allowed to trade on information about judgements he has yet to deliver?
  - giaour 11y ago
    That sounds like a question for a professional ethics board. I would assume a judge caught doing that would be sacked, disbarred, and publicly shamed, even if everything he did was strictly legal. "Wrong" doesn't automatically mean "criminal."
  - baddox 11y ago
    I don't think so, but I think that could be handled on the side of the court, not the side of the exchange. It could certainly be illegal, or at least a disbarrable offense, for a judge to use his or her knowledge for personal gain. Likewise, many of the most flagrant examples of insider trading could be covered under trade secret or contract law, like a CEO shorting his or her company then purposefully sabotaging it.

JacobH 11y ago

Telling people to buy stock you shorted is a bad idea. You're goal is for the stock to go lower.

Natanael_L 11y ago
> bankrupt Should deal with that
lmm 11y ago
Yeah but conversely you want to talk the price up before you lock in your short so that you get in at a better price.

eru 11y ago

> Things like borrowing money to short stocks in a company likely to go bankrupt, while telling people to buy. It's a dick move, but seems perfectly legal.