3 ms·

You're right, it was a poor example and I have deleted it. Perhaps we can agree that fairness would be an adequate justification for making insider trading ille

by allenz 8y ago

You're right, it was a poor example and I have deleted it. Perhaps we can agree that fairness would be an adequate justification for making insider trading illegal, and by analogy, that it would be an adequate justification for switching to batch auctions. If so, you have the burden of proof to show that the benefits of microsecond resolution outweighs our considerations of fairness.

vostok 8y ago
> Perhaps we can agree that fairness would be an adequate justification for making insider trading illegal I don't think that we agree on this. The way that I see it, investors always try to leverage information asymmetry and I don't see how you could realistically outlaw it. That's what makes HFT so hard. The people who are trading against you inherently know more than you do. They've talked to the companies, they've researched them, etc. Meanwhile HFTs stand by willing to buy and sell just below and just above mid market without any of that information. This is also why HFTs are willing to pay for retail order flow. At least you know that the retail orders probably don't know more than you so you're able to capture a greater fraction of the spread. Of course retail orders are a small fraction of all orders and an even smaller fraction of orders on the exchanges.
- allenz 8y ago
  I just found the SEC's official justification and amended my original comment above. I don't think you're going to win an argument against the SEC.
  - vostok 8y ago
    You may be interested in reading Salman v. United States [1]. It's a dense read so here's a news article [2] that I'll quote. > The justices rejected claims of defense lawyers who argued that there was no crime because no money exchanged hands between the insider and the stock trader. > Instead, the court said exchanges within a family are like gifts and have value, even if no dollars are paid. Sounds a lot like misappropriation is the concern and not merely having access to information that others don't. This is a case that's widely seen as making it easier to prosecute insider trading. [1] https://supreme.justia.com/cases/federal/us/580/15-628/opinion3.html https://supreme.justia.com/cases/federal/us/580/15-628/opini... [2] http://www.latimes.com/business/la-fi-supreme-court-insider-trading-20161206-story.html http://www.latimes.com/business/la-fi-supreme-court-insider-...
    - allenz 8y ago
      True, it's easier to prosecute insider trading as a breach of fiduciary duty to the company. But why were insider trading laws passed, and why is insider trading prosecuted? The SEC answers that "moral imperatives have driven the development of insider trading law in the United States."[1] The prosecutor against Salman, Preet Bharara, stated that "today's decision is a victory for fair markets and those who believe that the system should not be rigged."[2] [1] https://www.sec.gov/news/speech/speecharchive/1998/spch221.htm https://www.sec.gov/news/speech/speecharchive/1998/spch221.h... [2] https://www.nytimes.com/2016/12/06/business/dealbook/supreme-court-insider-trading.html https://www.nytimes.com/2016/12/06/business/dealbook/supreme...

by allenz 8y ago

vostok 8y ago

> Perhaps we can agree that fairness would be an adequate justification for making insider trading illegal I don't think that we agree on this. The way that I see it, investors always try to leverage information asymmetry and I don't see how you could realistically outlaw it. That's what makes HFT so hard. The people who are trading against you inherently know more than you do. They've talked to the companies, they've researched them, etc. Meanwhile HFTs stand by willing to buy and sell just below and just above mid market without any of that information. This is also why HFTs are willing to pay for retail order flow. At least you know that the retail orders probably don't know more than you so you're able to capture a greater fraction of the spread. Of course retail orders are a small fraction of all orders and an even smaller fraction of orders on the exchanges.

allenz 8y ago
I just found the SEC's official justification and amended my original comment above. I don't think you're going to win an argument against the SEC.
- vostok 8y ago
  You may be interested in reading Salman v. United States [1]. It's a dense read so here's a news article [2] that I'll quote. > The justices rejected claims of defense lawyers who argued that there was no crime because no money exchanged hands between the insider and the stock trader. > Instead, the court said exchanges within a family are like gifts and have value, even if no dollars are paid. Sounds a lot like misappropriation is the concern and not merely having access to information that others don't. This is a case that's widely seen as making it easier to prosecute insider trading. [1] https://supreme.justia.com/cases/federal/us/580/15-628/opinion3.html https://supreme.justia.com/cases/federal/us/580/15-628/opini... [2] http://www.latimes.com/business/la-fi-supreme-court-insider-trading-20161206-story.html http://www.latimes.com/business/la-fi-supreme-court-insider-...
  - allenz 8y ago
    True, it's easier to prosecute insider trading as a breach of fiduciary duty to the company. But why were insider trading laws passed, and why is insider trading prosecuted? The SEC answers that "moral imperatives have driven the development of insider trading law in the United States."[1] The prosecutor against Salman, Preet Bharara, stated that "today's decision is a victory for fair markets and those who believe that the system should not be rigged."[2] [1] https://www.sec.gov/news/speech/speecharchive/1998/spch221.htm https://www.sec.gov/news/speech/speecharchive/1998/spch221.h... [2] https://www.nytimes.com/2016/12/06/business/dealbook/supreme-court-insider-trading.html https://www.nytimes.com/2016/12/06/business/dealbook/supreme...