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If you happened to be one of the lucky people who bought options on a stock, index or whatever and in 24-48 hours it goes from being out of the money to deep in
by lefstathiou 7y ago
If you happened to be one of the lucky people who bought options on a stock, index or whatever and in 24-48 hours it goes from being out of the money to deep in the money, all these algorithms kick off and your name ends up on a list with the SEC. Next they start pulling your bank records and brokerage account records (which they have instant access to) to check for the obvious such as how old is this account, how often does it trade, how often you get lucky, where does your wife work, etc (last one is not a joke, they watch for people married to lawyers and such). As the flags go off, more people get involved, phones calls get made and accounts start getting frozen and then some dude wearing dark glasses on a cloudy day shows up at your office.
Say what you will about government agencies, the SEC takes insider trading very seriously and they are very well equipped to deal with it. Something so obvious happens from time to time but rarely works. At least not on a scale to move markets (a couple million here and there is nothing in grand scheme of things but even that gets caught). I’m a little skeptical here.
- sneak 7y agoIsn't insider trading the crime of trading on confidential information about a company? Dealing in securities (in the case of TFA, futures on broad index funds) in general on non-public information is not itself insider trading, as I understand it. There's lots of non-public information, even on specific companies, that one can legally trade on (provided they did not abuse a confidence themselves, such as an entirely outside party doing deep research on an investment).
- dan-robertson 7y agoI think this is true in the US: insider trading is roughly when you trade on non public information that comes from inside the company (counting cars in carparks on satellite photos is not insider trading as that information hasn’t come from inside the company, even though it is so hard to get as to feel nonpublic). I understand there are other illegal acts that correspond to trading on information which most people would consider ill-gotten. In Europe, I think insider trading tends to be a more broad classification.
- latencyloser 7y agoAgreed. My experience with regulators, CFTC and SEC, was they were pretty no-bullshit about auditing and compliance. We jumped through a lot of technical hoops to make them happy. My colleagues would get called away for hours, days explaining how our systems worked, how we verified it. etc. I recall some had to go testify in court about them!