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When those insiders represents a minority (in capital available to trade with), the positive effects of their trades from improved price signals can be far smal
by Natanael_L 11y ago
When those insiders represents a minority (in capital available to trade with), the positive effects of their trades from improved price signals can be far smaller than the negative effects from the bad incentives created. Consider a government administrator trading with relatively small sums, knowing what effect his unpublished decisions will have. He can make gains that are large for him, while causing significant losses for others that otherwise wouldn't have happened.
- nanis 11y agoI said free and legal insider trading by everyone. People in the company would also be able to trade on their information regarding potential government actions etc. Markets are information aggregators.
- Natanael_L 11y agoSome people have very disproportionate access to accurate information, and this disproportionate power and influence. You can't dismiss the harm abuse of that can cause. Just look at all the staged games done for the sake of betting profits.
- nanis 11y agoSo, the situation will be no worse than it currently is, but with the upside that more information would be available, and tons of money would not be wasted on stupid investigations. I do recommend you watch "American Greed" on CNBC.
- Natanael_L 11y agoExcept it would, abuse would be entirely risk free