5 ms·

People make money off advance information all the time. Often you can see that in the price action -- take this for example: https://imgur.com/mJq1OcY https://i

People make money off advance information all the time. Often you can see that in the price action -- take this for example: https://imgur.com/mJq1OcY https://imgur.com/mJq1OcY Three days before a positive press release, demand pressure beings to drive up the price. Coincidence? I'm too jaded to believe that.

marcoperaza 8y ago
It's worth noting that trading spikes in advance of public availability of news doesn't necessarily imply illegal activity. Overheard conversations between strangers, for example, are fair game.
- jandrese 8y ago
  There is probably also magnification effects from bots scanning the market for anomalies and piling on.
- all_blue_chucks 8y ago
  > Overheard conversations between strangers, for example, are fair game. Wrong. It's insider trading if you have material, nonpublic information. It doesn't matter how you got that information.
  - marcoperaza 8y ago
    >Wrong. It's insider trading if you have material, nonpublic information. It doesn't matter how you got that information. You are totally mistaken as far as the law in the United States. I can’t speak for other jurisdictions.
    - rrdharan 8y ago
      As I posted above, the poster is not mistaken.
      - marcoperaza 8y ago
        I think you've misread the thread.
  - rrdharan 8y ago
    No, it only matters if you had a duty to keep that information confidential: https://www.kiplinger.com/article/investing/T052-C008-S001-would-you-be-guilty-of-insider-trading.html https://www.kiplinger.com/article/investing/T052-C008-S001-w...
    - shkkmo 8y ago
      Several examples given that article seems to conflict with the explanation given in the other article linked in the replies, particularly situation 7. Your article justifies it "Yes" answer because you were told the information was confidential, but then the "case study" used to back this up includes envelopes on cash being exchanged for this information. My reading of the other article seems to indicate that you would be fine because the CEO was not compensated by you for providing the information and there is nothing to indicate that this information was given as a gift. Other article: https://www.bloomberg.com/opinion/articles/2015-07-31/when-can-investors-talk-to-companies- https://www.bloomberg.com/opinion/articles/2015-07-31/when-c... Edit: Given the bloomberg article cites relevant supreme court cases, I'm more inclined to believe it.
  - scott_s 8y ago
    Matt Levine has written extensively on how squishy the line can be: https://www.bloomberg.com/opinion/articles/2015-07-31/when-can-investors-talk-to-companies- https://www.bloomberg.com/opinion/articles/2015-07-31/when-c...
    - shkkmo 8y ago
      > So it's illegal "when an insider makes a gift of confidential information to a trading relative or friend." But if you read that too literally, you run right back into the first problem. There you are, at your job, talking on the phone with a company's investor relations department. The IR guy helps you with some questions about your model. You get off the phone convinced that the company is a buy. You go to buy stock. But wait. Your relationship with the IR guy is pretty cordial. You mentioned your love of fishing, and he said, "Hey, we ought to go fishing together sometime," and you said, "Sure, that sounds great," not that either of you meant it. That's messed up. It should be a breach of fiduciary duty to continue to interface as investor relations with an investor who you have established a friendship with. Being friendly on the phone is one thing, but join family vacations? As the relationship becomes closer, the fishier any exclusive information provided should smell. You become friends with someone? At a certain point both the investor and and investore relations personel should have to hand off the professional relationship to colleages to avoid the risk of insider trading charges.
      - ric2b 8y ago
        So don't give confidential information to outsiders of the company, whether they are friends or not? I don't see the issue.
        scott_s 8y ago
        "Confidential" is a big word. There is a lot of internal information about a company that is not strictly labeled "confidential." Putting that aside, I think Levine's point, which he makes in the piece I linked and has made in several other columns, is relevant: > Er. Um. Sure. But another component of effective professional analysis of the value of a company's stock is talking to the company. There's a reason that companies have earnings calls. There's a reason that, when analysts get into the weeds on those calls, the companies say things like, "We'll follow up with you individually afterwards." There's a reason that companies selling stocks or bonds do one-on-one meetings with potential buyers. There's a reason that companies not selling stocks and bonds also do one-on-one meetings with current and potential investors. There's a reason that companies have investor relations departments full of people who talk to current and potential investors. All of this gets to a point Levine has also made many times over, which is there is no explicit statute outlawing insider trading. Which seems crazy! People go to prison over it. But when you sit down and try to define it, it becomes even more of a mess, so here we are.
  - zorga 8y ago
    Absolutely not. > It doesn't matter how you got that information. Yes it does, if I didn't do anything illegal to acquire it, and I have no obligation to the company, I can use it legally, I'm not an insider.
    - wahern 8y ago
      Not quite. If you knowingly acquired the information from an insider and the insider himself would be liable for your trade (e.g. you're a friend or family member), then you could have derivative liability.
enzanki_ars 8y ago
That data does not look suspicious at all. A very quick google search shows this article [1] that was published around the same time as the start of that growth. [1]: https://www.fool.com/investing/2019/01/09/why-canopy-growth-jumped-today.aspx https://www.fool.com/investing/2019/01/09/why-canopy-growth-...
AznHisoka 8y ago
It's not a coincidence.. until it is. You can't make money consistently just looking at price actions (if you did, everyone would be doing it)
lozaning 8y ago
Is this not just a case of trade the rumor sell the news?
starpilot 8y ago
It's been pretty well established that insider trading is and has been rampant: https://www.cnbc.com/2018/02/14/insider-trading-is-still-rampant-on-wall-street-two-news-studies-suggest.html https://www.cnbc.com/2018/02/14/insider-trading-is-still-ram...
- butdang030 8y ago
  It’s almost as if the narrative that there exists two justice systems, one for the rich & one for the poor, has merit
- latch 8y ago
  There's also a not insignificant number of economist who think it would be better if it was legal. Insider trading laws remove information from the system. A common argument is that Enron could have never Enroned without the help of insider trading laws. The big winner here is Wallstreet because the information asymmetry still exists, and they now have the most knowledge that can legally be acted upon. (plus they can act on illegal knowledge and it's much harder to prove than anyone else acting on it).
  - sverhagen 8y ago
    Layman wondering here: would legal inside trading not encourage the few with the inside knowledge to themselves exhaust the benefit that is to be had from the information, at the expense of everyone else? Including shareholders?
    - latch 8y ago
      (1) is the best [i think] unbiased analysis I've seen on the subject that tries to look at it from many points of view. It seems very complicated, and I don't really understand. But it seems like in either cases (legal or illegal) the people who benefits and those who suffers is going to change in every case. For the average investor, in some cases having more efficient stock prices would be a benefit, in other cases, the added information asymmetry would be a unfair. Three points: 1 - Companies could still ban insider trading if that proved more efficient for them. If liquidity was low because insider trading was allowed, they could disallow it. The reverse is also true. So at least companies would have the choice (and investors would also have the choice of where to invest). 2 - While an insider could equally benefit from good and bad news, they are still incentivized towards positive results (salary, bonuses, keeping their job, reputation) 3 - My real problem with making insider trading illegal is that it's completely impossible to enforce consistently and fairly. This adds uncertainty (how much insider trading is going on in your current investments?) I think insider trading only applies to buying/selling, but what if someone has insider knowledge that causes them to NOT take an action. That seems as unfair but can't be enforced.. (1) https://www.frbatlanta.org/-/media/documents/research/publications/economic-review/1997/vol82no4_hu-noe.pdf https://www.frbatlanta.org/-/media/documents/research/public...
the_cat_kittles 8y ago
insider trading has to be the easiest damn thing in the world. discreetly tell someone you know in person a piece of insider knowledge, and let them profit off it, then reimburse you some how. i find it insane people think this isn't happening virtually 100% of the time.
- dahfizz 8y ago
  This seems like a pretty naive viewpoint. Don't you think the SEC would have thought about that? This kind of thing seems to me like it would be very easy to detect and penalize.
- rhizome 8y ago
  You say that like people don't get busted for this all the time.
  - darkpuma 8y ago
    How many get away with it?
    - rhizome 8y ago
      Unknowable.
flukus 8y ago
Some day I'd like to experiment with a press release driven trading strategy. I've seen plenty of cases where every man and his dog have been aware that $company sold $hugeNumber of $widgets, it can be open knowledge known industry wide, yet there is still a stock surge once the press release (or annual report or whatever) comes out.
dbuder 8y ago
Where I used to work, there was often a chorus of "they know".

marcoperaza 8y ago

It's worth noting that trading spikes in advance of public availability of news doesn't necessarily imply illegal activity. Overheard conversations between strangers, for example, are fair game.

jandrese 8y ago
There is probably also magnification effects from bots scanning the market for anomalies and piling on.
all_blue_chucks 8y ago
> Overheard conversations between strangers, for example, are fair game. Wrong. It's insider trading if you have material, nonpublic information. It doesn't matter how you got that information.
- marcoperaza 8y ago
  >Wrong. It's insider trading if you have material, nonpublic information. It doesn't matter how you got that information. You are totally mistaken as far as the law in the United States. I can’t speak for other jurisdictions.
  - rrdharan 8y ago
    As I posted above, the poster is not mistaken.
    - marcoperaza 8y ago
      I think you've misread the thread.
- rrdharan 8y ago
  No, it only matters if you had a duty to keep that information confidential: https://www.kiplinger.com/article/investing/T052-C008-S001-would-you-be-guilty-of-insider-trading.html https://www.kiplinger.com/article/investing/T052-C008-S001-w...
  - shkkmo 8y ago
    Several examples given that article seems to conflict with the explanation given in the other article linked in the replies, particularly situation 7. Your article justifies it "Yes" answer because you were told the information was confidential, but then the "case study" used to back this up includes envelopes on cash being exchanged for this information. My reading of the other article seems to indicate that you would be fine because the CEO was not compensated by you for providing the information and there is nothing to indicate that this information was given as a gift. Other article: https://www.bloomberg.com/opinion/articles/2015-07-31/when-can-investors-talk-to-companies- https://www.bloomberg.com/opinion/articles/2015-07-31/when-c... Edit: Given the bloomberg article cites relevant supreme court cases, I'm more inclined to believe it.
- scott_s 8y ago
  Matt Levine has written extensively on how squishy the line can be: https://www.bloomberg.com/opinion/articles/2015-07-31/when-can-investors-talk-to-companies- https://www.bloomberg.com/opinion/articles/2015-07-31/when-c...
  - shkkmo 8y ago
    > So it's illegal "when an insider makes a gift of confidential information to a trading relative or friend." But if you read that too literally, you run right back into the first problem. There you are, at your job, talking on the phone with a company's investor relations department. The IR guy helps you with some questions about your model. You get off the phone convinced that the company is a buy. You go to buy stock. But wait. Your relationship with the IR guy is pretty cordial. You mentioned your love of fishing, and he said, "Hey, we ought to go fishing together sometime," and you said, "Sure, that sounds great," not that either of you meant it. That's messed up. It should be a breach of fiduciary duty to continue to interface as investor relations with an investor who you have established a friendship with. Being friendly on the phone is one thing, but join family vacations? As the relationship becomes closer, the fishier any exclusive information provided should smell. You become friends with someone? At a certain point both the investor and and investore relations personel should have to hand off the professional relationship to colleages to avoid the risk of insider trading charges.
    - ric2b 8y ago
      So don't give confidential information to outsiders of the company, whether they are friends or not? I don't see the issue.
      - scott_s 8y ago
        "Confidential" is a big word. There is a lot of internal information about a company that is not strictly labeled "confidential." Putting that aside, I think Levine's point, which he makes in the piece I linked and has made in several other columns, is relevant: > Er. Um. Sure. But another component of effective professional analysis of the value of a company's stock is talking to the company. There's a reason that companies have earnings calls. There's a reason that, when analysts get into the weeds on those calls, the companies say things like, "We'll follow up with you individually afterwards." There's a reason that companies selling stocks or bonds do one-on-one meetings with potential buyers. There's a reason that companies not selling stocks and bonds also do one-on-one meetings with current and potential investors. There's a reason that companies have investor relations departments full of people who talk to current and potential investors. All of this gets to a point Levine has also made many times over, which is there is no explicit statute outlawing insider trading. Which seems crazy! People go to prison over it. But when you sit down and try to define it, it becomes even more of a mess, so here we are.
- zorga 8y ago
  Absolutely not. > It doesn't matter how you got that information. Yes it does, if I didn't do anything illegal to acquire it, and I have no obligation to the company, I can use it legally, I'm not an insider.
  - wahern 8y ago
    Not quite. If you knowingly acquired the information from an insider and the insider himself would be liable for your trade (e.g. you're a friend or family member), then you could have derivative liability.

enzanki_ars 8y ago

That data does not look suspicious at all. A very quick google search shows this article [1] that was published around the same time as the start of that growth. [1]: https://www.fool.com/investing/2019/01/09/why-canopy-growth-jumped-today.aspx https://www.fool.com/investing/2019/01/09/why-canopy-growth-...

AznHisoka 8y ago

It's not a coincidence.. until it is. You can't make money consistently just looking at price actions (if you did, everyone would be doing it)

lozaning 8y ago

Is this not just a case of trade the rumor sell the news?

starpilot 8y ago

It's been pretty well established that insider trading is and has been rampant: https://www.cnbc.com/2018/02/14/insider-trading-is-still-rampant-on-wall-street-two-news-studies-suggest.html https://www.cnbc.com/2018/02/14/insider-trading-is-still-ram...

butdang030 8y ago
It’s almost as if the narrative that there exists two justice systems, one for the rich & one for the poor, has merit
latch 8y ago
There's also a not insignificant number of economist who think it would be better if it was legal. Insider trading laws remove information from the system. A common argument is that Enron could have never Enroned without the help of insider trading laws. The big winner here is Wallstreet because the information asymmetry still exists, and they now have the most knowledge that can legally be acted upon. (plus they can act on illegal knowledge and it's much harder to prove than anyone else acting on it).
- sverhagen 8y ago
  Layman wondering here: would legal inside trading not encourage the few with the inside knowledge to themselves exhaust the benefit that is to be had from the information, at the expense of everyone else? Including shareholders?
  - latch 8y ago
    (1) is the best [i think] unbiased analysis I've seen on the subject that tries to look at it from many points of view. It seems very complicated, and I don't really understand. But it seems like in either cases (legal or illegal) the people who benefits and those who suffers is going to change in every case. For the average investor, in some cases having more efficient stock prices would be a benefit, in other cases, the added information asymmetry would be a unfair. Three points: 1 - Companies could still ban insider trading if that proved more efficient for them. If liquidity was low because insider trading was allowed, they could disallow it. The reverse is also true. So at least companies would have the choice (and investors would also have the choice of where to invest). 2 - While an insider could equally benefit from good and bad news, they are still incentivized towards positive results (salary, bonuses, keeping their job, reputation) 3 - My real problem with making insider trading illegal is that it's completely impossible to enforce consistently and fairly. This adds uncertainty (how much insider trading is going on in your current investments?) I think insider trading only applies to buying/selling, but what if someone has insider knowledge that causes them to NOT take an action. That seems as unfair but can't be enforced.. (1) https://www.frbatlanta.org/-/media/documents/research/publications/economic-review/1997/vol82no4_hu-noe.pdf https://www.frbatlanta.org/-/media/documents/research/public...

the_cat_kittles 8y ago

insider trading has to be the easiest damn thing in the world. discreetly tell someone you know in person a piece of insider knowledge, and let them profit off it, then reimburse you some how. i find it insane people think this isn't happening virtually 100% of the time.

dahfizz 8y ago
This seems like a pretty naive viewpoint. Don't you think the SEC would have thought about that? This kind of thing seems to me like it would be very easy to detect and penalize.
rhizome 8y ago
You say that like people don't get busted for this all the time.
- darkpuma 8y ago
  How many get away with it?
  - rhizome 8y ago
    Unknowable.

flukus 8y ago

Some day I'd like to experiment with a press release driven trading strategy. I've seen plenty of cases where every man and his dog have been aware that $company sold $hugeNumber of $widgets, it can be open knowledge known industry wide, yet there is still a stock surge once the press release (or annual report or whatever) comes out.

dbuder 8y ago

Where I used to work, there was often a chorus of "they know".