7 ms·

Are you surprised that insider trading is occurring or just that it is blatantly obvious in this specific instance? This kind of thing happens regularly by all

Are you surprised that insider trading is occurring or just that it is blatantly obvious in this specific instance? This kind of thing happens regularly by all sorts of players. That's part of the reason retail investors should just buy an index fund, they can't expect to win against professionals engaging in insider trading all the time. SEC enforcement of insider trading was 51 in all of 2018. 51, out of probably millions of instances. https://www.cov.com/en/news-and-insights/insights/2018/11/sec-enforcement-activity-in-2018 https://www.cov.com/en/news-and-insights/insights/2018/11/se...

dehrmann 7y ago
Quick anecdote: I was in a bar in NYC and overheard an i-banker running his mouth about an M&A deal he was working on. The deal closed a month or two later.
- pmikesell 7y ago
  Good point - this was information leakage that, even if you had traded on it - would not be insider trading.
  - dehrmann 7y ago
    To be clear, these were private companies, so I obviously didn't trade on that information, but I somehow doubt that this guy was really thinking about that when he was trying to impress his date.
  - dogma1138 7y ago
    Depends on the country, in the US no in the UK it would be.
  - lucb1e 7y ago
    So basically you're not allowed to trade with foreknowledge, it has to be a lottery? Stocks always seemed like legal gambling to me. If you can't predict it and you can't use any edge that others don't know about, then doing anything but using index funds is gambling, or am I missing something?
    - 0x445442 7y ago
      The only thing I would say you are missing is differentiating index funds. Also insurance companies are basically bookies.
      - lucb1e 7y ago
        Regarding differentiating index funds, what are those? When ducking "differentiating index funds", I find results about index funds versus ETFs (afaik an ETF is just a stock) or index funds versus mutual funds (not sure what those are). Are ETFs and mutual funds what you mean by differentiating index funds, or am I looking at the wrong thing? > Also insurance companies are basically bookies. Hehe yes, it also occurred to me that being in a car accident is basically winning the insurance lottery that car owners pay into.
    - anonu 7y ago
      Read Matt Lewis and his writings on insider trading. As he would say: Insider trading is about theft. If you pickup a dollar bill on the ground, could you be accused of theft? Probably not... Also: https://en.wikipedia.org/wiki/Mosaic_theory_(investments) https://en.wikipedia.org/wiki/Mosaic_theory_(investments). So you can get an edge by sourcing information from various places and piecing it together better than anyone else... that's fine as well.
      - chimeracoder 7y ago
        I think you mean Matt Levine, not Matt Lewis. Matt Levine has written about how insider trading is really about theft, not fairness: https://www.bloomberg.com/opinion/articles/2015-10-05/justices-aren-t-interested-in-insider-trading-case https://www.bloomberg.com/opinion/articles/2015-10-05/justic... > If you pickup a dollar bill on the ground, could you be accused of theft? Probably not... Depends on the country - in some countries, yes, that is actually considered theft.
        anonu 7y ago
        Yes - Matt Levine!
  - deleted 7y ago
    [deleted]
  - illumin8 7y ago
    This is incorrect. If you trade on material non-public information, it is insider trading. The only questions you have to ask yourself are: - is the information material? (would an average investor learning of it impact the stock price or valuation) - is the information non-public? If the answer to both of the above is yes, you are insider trading, whether you heard about it from a friend, family member, or overheard someone in a bar. It's not only unethical to trade on such info, it's illegal.
- salex89 7y ago
  I was in a pub hearing a guy talking about the startup I was/am working in being acquired soon. He was right....
xparco 7y ago
Stop with the conspiracy theories
ur-whale 7y ago
When an independent investment firm conducts extensive research (including hiring private eyes to track exec movements) and manages to unearth valuable information on a target company, is that counted as insider trading?
- nvrspyx 7y ago
  If the valuable information could damage the company, I believe it would fall under corporate espionage. But, IANAL. Others may be able to provide a better response.
FDSGSG 7y ago
> That's part of the reason retail investors should just buy an index fund, they can't expect to win against professionals engaging in insider trading all the time Investing isn't zero-sum, there's no need to "win against" insider traders.
- bkinnard 7y ago
  Investing isn't zero-sum, but generating alpha is
  - ghostpepper 7y ago
    What is alpha, in this context?
    - chimeracoder 7y ago
      > What is alpha, in this context? Alpha is the degree to which an investment outperforms "the market", where "the market" can be any benchmark you want to use. So yes, by definition, alpha is zero-sum in that not everyone can beat the benchmark, in the same way that not everyone can be above average. But this tautology isn't particularly meaningful, because most people don't care about beating "the market"; they care about their financial health and solvency, and in many cases, slightly under-performing "the market" can still be perfectly acceptable for a lot of investors if the market is performing well enough and they've met their own expected targets. (This is, in fact, the principle behind index funds: index funds will never beat the market, and are guaranteed to underperform the market after fees are taken into account, but yet many people still put their money in index funds).

dehrmann 7y ago

Quick anecdote: I was in a bar in NYC and overheard an i-banker running his mouth about an M&A deal he was working on. The deal closed a month or two later.

pmikesell 7y ago
Good point - this was information leakage that, even if you had traded on it - would not be insider trading.
- dehrmann 7y ago
  To be clear, these were private companies, so I obviously didn't trade on that information, but I somehow doubt that this guy was really thinking about that when he was trying to impress his date.
- dogma1138 7y ago
  Depends on the country, in the US no in the UK it would be.
- lucb1e 7y ago
  So basically you're not allowed to trade with foreknowledge, it has to be a lottery? Stocks always seemed like legal gambling to me. If you can't predict it and you can't use any edge that others don't know about, then doing anything but using index funds is gambling, or am I missing something?
  - 0x445442 7y ago
    The only thing I would say you are missing is differentiating index funds. Also insurance companies are basically bookies.
    - lucb1e 7y ago
      Regarding differentiating index funds, what are those? When ducking "differentiating index funds", I find results about index funds versus ETFs (afaik an ETF is just a stock) or index funds versus mutual funds (not sure what those are). Are ETFs and mutual funds what you mean by differentiating index funds, or am I looking at the wrong thing? > Also insurance companies are basically bookies. Hehe yes, it also occurred to me that being in a car accident is basically winning the insurance lottery that car owners pay into.
  - anonu 7y ago
    Read Matt Lewis and his writings on insider trading. As he would say: Insider trading is about theft. If you pickup a dollar bill on the ground, could you be accused of theft? Probably not... Also: https://en.wikipedia.org/wiki/Mosaic_theory_(investments) https://en.wikipedia.org/wiki/Mosaic_theory_(investments). So you can get an edge by sourcing information from various places and piecing it together better than anyone else... that's fine as well.
    - chimeracoder 7y ago
      I think you mean Matt Levine, not Matt Lewis. Matt Levine has written about how insider trading is really about theft, not fairness: https://www.bloomberg.com/opinion/articles/2015-10-05/justices-aren-t-interested-in-insider-trading-case https://www.bloomberg.com/opinion/articles/2015-10-05/justic... > If you pickup a dollar bill on the ground, could you be accused of theft? Probably not... Depends on the country - in some countries, yes, that is actually considered theft.
      - anonu 7y ago
        Yes - Matt Levine!
- deleted 7y ago
  [deleted]
- illumin8 7y ago
  This is incorrect. If you trade on material non-public information, it is insider trading. The only questions you have to ask yourself are: - is the information material? (would an average investor learning of it impact the stock price or valuation) - is the information non-public? If the answer to both of the above is yes, you are insider trading, whether you heard about it from a friend, family member, or overheard someone in a bar. It's not only unethical to trade on such info, it's illegal.
salex89 7y ago
I was in a pub hearing a guy talking about the startup I was/am working in being acquired soon. He was right....

xparco 7y ago

Stop with the conspiracy theories

ur-whale 7y ago

When an independent investment firm conducts extensive research (including hiring private eyes to track exec movements) and manages to unearth valuable information on a target company, is that counted as insider trading?

nvrspyx 7y ago
If the valuable information could damage the company, I believe it would fall under corporate espionage. But, IANAL. Others may be able to provide a better response.

FDSGSG 7y ago

> That's part of the reason retail investors should just buy an index fund, they can't expect to win against professionals engaging in insider trading all the time Investing isn't zero-sum, there's no need to "win against" insider traders.

bkinnard 7y ago
Investing isn't zero-sum, but generating alpha is
- ghostpepper 7y ago
  What is alpha, in this context?
  - chimeracoder 7y ago
    > What is alpha, in this context? Alpha is the degree to which an investment outperforms "the market", where "the market" can be any benchmark you want to use. So yes, by definition, alpha is zero-sum in that not everyone can beat the benchmark, in the same way that not everyone can be above average. But this tautology isn't particularly meaningful, because most people don't care about beating "the market"; they care about their financial health and solvency, and in many cases, slightly under-performing "the market" can still be perfectly acceptable for a lot of investors if the market is performing well enough and they've met their own expected targets. (This is, in fact, the principle behind index funds: index funds will never beat the market, and are guaranteed to underperform the market after fees are taken into account, but yet many people still put their money in index funds).