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There is a major schism in this between the US and Europe (that I only learned about in a recent HN thread). In the US insider trading laws are geared around p

There is a major schism in this between the US and Europe (that I only learned about in a recent HN thread). In the US insider trading laws are geared around protecting shareholders from insiders. Solving for the agency problem. In that case an outsider who finds non-public data and trades on it is likely (though the complexity of this is one of the downsides of the regine) not insider trading. In many European regimes the goal is information parity. In that case outsiders can generate material non-public data, and thus illegally trade on it. As someone who spent a lot of time under the US regime the European model blows my mind, but in objective terms there isn’t anything bizarre about it.

sokoloff 8y ago
> outsiders can generate material non-public data, and thus illegally trade on it. It does seem (more than) a little bizarre to me. If I understand your post correctly, in Europe, I could do traffic counts at malls, conclude (correctly) something about a company's sales from that, trade profitably based on that conclusion, and be prosecuted successfully for it? If that's the case, how should I create my own opinion about the state of a company in order to decide how much to bid (or ask) for the shares of that company? Am I just supposed to blindly make investments since any amount of private research is bound to be deemed illegal? It seems that the entire purpose of research is to generate an informed opinion which differs from the current public opinion. We've found hedge funds placing orders with the presumed intention of deriving order volume information from sequential IDs that we inadvertently leaked in the shipping process (since fixed). My view is "good on them for thinking of it!" Is trading based on that illegal as well?
- kasey_junk 8y ago
  I am clearly not an expert on this, but I suspect the answer is not “don’t do research” it’s “disclose the result”. As for where the lines are drawn I’d guess there is a whole industry around determining that just like in the States.

sokoloff 8y ago

> outsiders can generate material non-public data, and thus illegally trade on it. It does seem (more than) a little bizarre to me. If I understand your post correctly, in Europe, I could do traffic counts at malls, conclude (correctly) something about a company's sales from that, trade profitably based on that conclusion, and be prosecuted successfully for it? If that's the case, how should I create my own opinion about the state of a company in order to decide how much to bid (or ask) for the shares of that company? Am I just supposed to blindly make investments since any amount of private research is bound to be deemed illegal? It seems that the entire purpose of research is to generate an informed opinion which differs from the current public opinion. We've found hedge funds placing orders with the presumed intention of deriving order volume information from sequential IDs that we inadvertently leaked in the shipping process (since fixed). My view is "good on them for thinking of it!" Is trading based on that illegal as well?

kasey_junk 8y ago
I am clearly not an expert on this, but I suspect the answer is not “don’t do research” it’s “disclose the result”. As for where the lines are drawn I’d guess there is a whole industry around determining that just like in the States.