4 ms·

Not a popular opinion, but should insider trading be legal? It seems to create a false sense of security, that people inside the company aren't going to do bad

Not a popular opinion, but should insider trading be legal? It seems to create a false sense of security, that people inside the company aren't going to do bad things. Many people have made their fortunes on some degree of insider trading that they wouldn't have made otherwise. Wouldn't the markets be more efficient without this mirage?

whatthesmack 9y ago
> Not a popular opinion, but should insider trading be legal? Isn't this legal for members of the United States Congress? I can't recall the specifics, but seem to remember some special exemption for them from insider trading rules.
- 1mike12 9y ago
  Well congress itself seems to do abnormally well on their stock portfolio. They have some absurd return beating the indices by a wide margin. http://www.huffingtonpost.com/2011/05/24/members-of-congress-get-a_n_866387.html http://www.huffingtonpost.com/2011/05/24/members-of-congress...
- FireBeyond 9y ago
  Yes, members of Congress are not prohibited from making stock trades based on information they learn in their role as a Congressional rep. This includes not just routine and public hearings, but also closed and secret/classified hearings.
matt4077 9y ago
No–legalising insider trading would destroy the market, because anybody not in a position to have insider knowledge would be at a severe disadvantage so as to make the expected return of investing negative. An analogy: It'd be like playing online chess for money, without any way to stop your opponent from using a computer to make their moves. Or like the Olympics where some people are allowed to use performance enhancing drugs. After a very short time, most everyone will have left the market. There's also no more reason to legalise insider trading than murder or burglary. The prevalence is very likely to be at an all-time low currently, because the statistical methods used to spot insider trading in market data have improved dramatically. Some quant funds also flag suspicious trades as a sort of by-product of their work and share that data with the authorities.

whatthesmack 9y ago

> Not a popular opinion, but should insider trading be legal? Isn't this legal for members of the United States Congress? I can't recall the specifics, but seem to remember some special exemption for them from insider trading rules.

1mike12 9y ago
Well congress itself seems to do abnormally well on their stock portfolio. They have some absurd return beating the indices by a wide margin. http://www.huffingtonpost.com/2011/05/24/members-of-congress-get-a_n_866387.html http://www.huffingtonpost.com/2011/05/24/members-of-congress...
FireBeyond 9y ago
Yes, members of Congress are not prohibited from making stock trades based on information they learn in their role as a Congressional rep. This includes not just routine and public hearings, but also closed and secret/classified hearings.

matt4077 9y ago

No–legalising insider trading would destroy the market, because anybody not in a position to have insider knowledge would be at a severe disadvantage so as to make the expected return of investing negative. An analogy: It'd be like playing online chess for money, without any way to stop your opponent from using a computer to make their moves. Or like the Olympics where some people are allowed to use performance enhancing drugs. After a very short time, most everyone will have left the market. There's also no more reason to legalise insider trading than murder or burglary. The prevalence is very likely to be at an all-time low currently, because the statistical methods used to spot insider trading in market data have improved dramatically. Some quant funds also flag suspicious trades as a sort of by-product of their work and share that data with the authorities.