5 ms·

>insider trading is (generally) trading on material non-public information No, this isn't how it's defined in the US. It's completely legal to trade on materia

>insider trading is (generally) trading on material non-public information No, this isn't how it's defined in the US. It's completely legal to trade on material non-public information that you collect on your own via research (e.g. satellites looking at retail parking lots). In the US, it's only illegal if you use information to trade that violates a fiduciary duty (e.g. using non-public information from a CEO).

projectramo 8y ago
I have to admit I am confused on this point. I thought there was one theory that owning the stock makes one an insider because you are an owner. I find people worried and thinking about this all over the web: https://www.ibtimes.com/should-hedge-funds-be-concerned-about-insider-trading-alternative-data-2602756 https://www.ibtimes.com/should-hedge-funds-be-concerned-abou...
- jmalicki 8y ago
  I think you're misunderstanding their theory of why it would be bad? In the example where a hedge fund buys information from Best Buy about how many Panasonic TVs they sell, Best Buy may have a duty to Panasonic, and thus are an insider in that context, so if the hedge fund buys that data from Best Buy, they could potentially be trading on insider information. It's not because they own the stock.
  - projectramo 8y ago
    On rereading, that sounds right.
- Aloisius 8y ago
  That article appears to talk about whether it is insider trading to trade on information that originated with a public company (insiders) and privately sold - including sales information that hasn't been reported yet in public filings. There are serious questions about whether that, under US law, would be considered insider trading as it appears to be just that. Simply owning a single share of stock in a company does not make one an insider. An insider, in the US, is someone who either works for the company, owns more than 10% of a company or has some other kind of fiduciary duty to the company. Insider trading can include anyone trading on any information from insiders even if they themselves aren't. Mind, this is different in other countries.
rococode 8y ago
I don't remember the exact details, but I remember reading about a guy who hired a team of researchers to find problems in some company's product (I think it was pharmaceuticals), shorted the stock, and then published the results causing the stock price to tank. Totally legal since he wasn't affiliated with the company and the information that was published wasn't misleading.

projectramo 8y ago

I have to admit I am confused on this point. I thought there was one theory that owning the stock makes one an insider because you are an owner. I find people worried and thinking about this all over the web: https://www.ibtimes.com/should-hedge-funds-be-concerned-about-insider-trading-alternative-data-2602756 https://www.ibtimes.com/should-hedge-funds-be-concerned-abou...

jmalicki 8y ago
I think you're misunderstanding their theory of why it would be bad? In the example where a hedge fund buys information from Best Buy about how many Panasonic TVs they sell, Best Buy may have a duty to Panasonic, and thus are an insider in that context, so if the hedge fund buys that data from Best Buy, they could potentially be trading on insider information. It's not because they own the stock.
- projectramo 8y ago
  On rereading, that sounds right.
Aloisius 8y ago
That article appears to talk about whether it is insider trading to trade on information that originated with a public company (insiders) and privately sold - including sales information that hasn't been reported yet in public filings. There are serious questions about whether that, under US law, would be considered insider trading as it appears to be just that. Simply owning a single share of stock in a company does not make one an insider. An insider, in the US, is someone who either works for the company, owns more than 10% of a company or has some other kind of fiduciary duty to the company. Insider trading can include anyone trading on any information from insiders even if they themselves aren't. Mind, this is different in other countries.

rococode 8y ago

I don't remember the exact details, but I remember reading about a guy who hired a team of researchers to find problems in some company's product (I think it was pharmaceuticals), shorted the stock, and then published the results causing the stock price to tank. Totally legal since he wasn't affiliated with the company and the information that was published wasn't misleading.