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Trading on non-public information is generally illegal in the US. Some of this may squeek by, but the majority of these suggestions (like Visa/Mastercard knowin

Trading on non-public information is generally illegal in the US. Some of this may squeek by, but the majority of these suggestions (like Visa/Mastercard knowing actual sales numbers) would certainly be illegal.

korch 16y ago
I haven't (yet) researched this topic very much, but if it is only legal to trade on public information, then how are all of the private investment banks on Wall St. legally allowed to develop astronomically sophisticated and proprietary, automated securities trading platforms using data from private commercial sources?
- starpilot 16y ago
  Proprietary trading does not necessarily involve insider information. "Insider" refers to those privy to exclusive data about a public corporation that have not been publicly released. Insider trading laws do not preclude trading on independently drawn ideas, and do not entail publicizing one's own reasons for deciding to invest, because those ideas do not originate within the company being considered for investment. An investment bank may trade away with whatever methods they have in-house, as long as they have not gained via information about the company that is not publicly available. “Private commercial sources” is vague, but if you mean paid databases like LexisNexis, Hoovers, or even 10kwizard, those just consolidate already public information in a more convenient formats. They don’t draw from insiders. Of course, it's an open secret that insider trading is rampant in all major stock markets. You can’t police every pair of CEO golf buddies. I can’t provide a cite, but a study done a few years ago confirmed major movements shortly before (hours) major announcements with the vast majority of stocks in the Canadian exchanges. I’d expect the problem to be greater in the US markets.
  - qq66 16y ago
    What if you surveyed 100 Fortune 500 CIOs to figure out how much they're planning on spending with Oracle next year, and used that to trade Oracle stock? Is that illegal? It's certainly not coming from an Oracle "insider." That's what Google would be doing, but instead of 100 CIOs, they'd be aggregating data from millions of ordinary people.
damoncali 16y ago
Companies do it all the time. They buy and sell their own stock, based on information that never makes it into a financial statement, for example. Trading another company's stock based on secret information is also very much legal. Mark Cuban practically made a sport out of it with http://sharesluth.com http://sharesluth.com Now if there was major market collusion by industry giants to combine data and do horrible things, you're getting out of my knowledge range, but there's nothing generally illegal about trading on info nobody else knows about.
- count 16y ago
  I believe the limitation on trading on secret information is limited to 'privileged' information, not 'secret'. If you're entrusted with the information by the company (as an employee, officer, consultant, etc.), you are not allowed to use it. If you discover it for whatever reason, and have no actual relation to the company, I don't think it counts - that's how Mark Cuban gets by with Share Sleuth. That said, IANAL, so don't take that as legal advice :)
- tnorthcutt 16y ago
  That's http://sharesleuth.com/ http://sharesleuth.com/ FYI.
samt 16y ago
Depends on how you get such information. Renting satellites to take photos of Walmart parking lots? Trade away.
jasonwatkinspdx 16y ago
AFAIK many energy/utility companies have trading divisions, and navigate the information restrictions successfully enough to not get shut down.
yummyfajitas 16y ago
I don't think this is true. You can't trade on insider information, i.e. information you've gained from a corporate insider who has a duty not to reveal it. If Steve Jobs tells you he has cancer, it's insider trading to short AAPL. If you pass Steve Jobs on the street and think "holy shit, that guy looks sick", you are free to short AAPL.

korch 16y ago

I haven't (yet) researched this topic very much, but if it is only legal to trade on public information, then how are all of the private investment banks on Wall St. legally allowed to develop astronomically sophisticated and proprietary, automated securities trading platforms using data from private commercial sources?

starpilot 16y ago
Proprietary trading does not necessarily involve insider information. "Insider" refers to those privy to exclusive data about a public corporation that have not been publicly released. Insider trading laws do not preclude trading on independently drawn ideas, and do not entail publicizing one's own reasons for deciding to invest, because those ideas do not originate within the company being considered for investment. An investment bank may trade away with whatever methods they have in-house, as long as they have not gained via information about the company that is not publicly available. “Private commercial sources” is vague, but if you mean paid databases like LexisNexis, Hoovers, or even 10kwizard, those just consolidate already public information in a more convenient formats. They don’t draw from insiders. Of course, it's an open secret that insider trading is rampant in all major stock markets. You can’t police every pair of CEO golf buddies. I can’t provide a cite, but a study done a few years ago confirmed major movements shortly before (hours) major announcements with the vast majority of stocks in the Canadian exchanges. I’d expect the problem to be greater in the US markets.
- qq66 16y ago
  What if you surveyed 100 Fortune 500 CIOs to figure out how much they're planning on spending with Oracle next year, and used that to trade Oracle stock? Is that illegal? It's certainly not coming from an Oracle "insider." That's what Google would be doing, but instead of 100 CIOs, they'd be aggregating data from millions of ordinary people.

damoncali 16y ago

Companies do it all the time. They buy and sell their own stock, based on information that never makes it into a financial statement, for example. Trading another company's stock based on secret information is also very much legal. Mark Cuban practically made a sport out of it with http://sharesluth.com http://sharesluth.com Now if there was major market collusion by industry giants to combine data and do horrible things, you're getting out of my knowledge range, but there's nothing generally illegal about trading on info nobody else knows about.

count 16y ago
I believe the limitation on trading on secret information is limited to 'privileged' information, not 'secret'. If you're entrusted with the information by the company (as an employee, officer, consultant, etc.), you are not allowed to use it. If you discover it for whatever reason, and have no actual relation to the company, I don't think it counts - that's how Mark Cuban gets by with Share Sleuth. That said, IANAL, so don't take that as legal advice :)
tnorthcutt 16y ago
That's http://sharesleuth.com/ http://sharesleuth.com/ FYI.

samt 16y ago

Depends on how you get such information. Renting satellites to take photos of Walmart parking lots? Trade away.

jasonwatkinspdx 16y ago

AFAIK many energy/utility companies have trading divisions, and navigate the information restrictions successfully enough to not get shut down.

yummyfajitas 16y ago

I don't think this is true. You can't trade on insider information, i.e. information you've gained from a corporate insider who has a duty not to reveal it. If Steve Jobs tells you he has cancer, it's insider trading to short AAPL. If you pass Steve Jobs on the street and think "holy shit, that guy looks sick", you are free to short AAPL.