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The description of the second paper’s conclusions don’t seem particularly damning. Large active investors have a huge incentive to acquire relevant information
by twoodfin 9y ago
The description of the second paper’s conclusions don’t seem particularly damning. Large active investors have a huge incentive to acquire relevant information prior to big announcements. That’s why they have expensive research departments.
- rockinghigh 9y agoIf that information is material and non-public, it’s considered insider trading.
- danielvf 9y agoThat's common confusion. If you work at Wal-Mart, know the financials of store sales before it is released, and trade off that, you can go to jail. But you don't work at Wal-Mart, buy satellite imagery and count cars in the parking lots to estimate sales, and trade off that, then it's totally cool. It's not so much that the information is non-public that makes it a crime - it's the insiderness - abusing a position of investor's trust.
- kasey_junk 9y agoIt’s more detailed than even that. You can trade if you disclose you are doing it for instance. Really what people should remember is that insider trading laws aren’t to protect the rest of the market. They are to protect the existing investors. Illegal insider trading happens when you have fiduciary duty to someone else (other shareholders) and you steal from them.
- discoursism 9y agoOnly if the information is acquired from an insider. If you develop exclusive information without relying on internal sources, it's not insider trading. But that is very hard to do. I'm convinced that some amount of insider trading is going on. Just the other day I was in a sauna at a gym in midtown and walked in on some bankers discussing a deal they were working on and literally whether they ought to illegal trade on their insider knowledge. They kept on talking about it for a time while I was with them, and then said of me, "Better hope this guy's not from the SEC!" It was pretty blatant. Now these kids were idiots, so maybe they wouldn't even be able to make a profit with insider knowledge. But if they're talking about it, I'm sure non-zero numbers of people are doing it.
- bfuller 9y agoThe steamroom at my JCC is like ground zero for financial crimes
- jnordwick 9y agoLol. Meyerson JCC just looks like the cover of a Gresham novel.
- pbhjpbhj 9y agoSounds like they were feeling you out as a mark.
- discoursism 9y agoI'm quite certain that wasn't what it was, given the flow of the conversation, but interesting idea nonetheless.
- skybrian 9y agoNot legal advice, but it seems to be only if someone with a duty to keep something secret revealed it. It's fine to figure it out another way. (Satellite pictures, visiting stores, etc.)
- ouid 9y agoI have a huge incentive to steal all the cash that I come into contact with. Fortunately, in both of these scenarios, our actions are illegal.
- qeternity 9y agoMost people fundamentally misunderstand material non public information (MNPI) and the laws around insider trading. Having a research desk that generates MNPI is not illegal, nor is trading on this info. Say for instance that I discover a new killer Apple product buried deep in Apple code. It's not illegal for me to trade on this info, but it is illegal for Tim Cook to. Or let's say I use satellite imagery to determine McDonald's quarterly sales, the same applies.
- tptacek 9y agoNot only is it not illegal, but the whole idea of public trading markets depends on people doing it.
- Armisael16 9y agoWhat laws or regulations does it violate? It certainly isn't insider trading if you aren't an insider. EDIT: Oops, missed the double negative.
- tptacek 9y agoWe're saying the same thing. You missed the "not" in my sentence. :)
- qeternity 9y agoExactly. Thorough price discovery is how markets efficiently allocate capital. Traders and investors are compensated for their contributions to this process.
- rwallace 9y agoI read a story a while ago about a guy on an airline flight, looked out the window and happened to see smoke coming from a factory; on landing, he made a phone call from the airport to sell his shares in the company that owned the factory, and was subsequently convicted of insider trading. It sounds from what you're saying like this story should not be accurate?