5 ms·

Can you explain an example insider trading situation involving Bloomberg terminals?

by kovek 6y ago

blueyes 6y ago
I do not think that Bloomberg terminals are any more useful for insider trading, in the strict sense, than any other communication device, and probably less so because they are more likely to be monitored by one's employer. However, there is one exception: Bloomberg News publishes a lot of scoops about public companies. That is its raison d'être. To move markets. Those Bloomberg scoops are released to terminal subscribers 15-20 minutes before the news hits the rest of the market. So it's a kind of syndication of inside information, obtained by Bloomberg reporters from anonymous sources somehow apprised of the companies that the journalists cover. But Bloomberg doesn't trade. Its clients do. Bloomberg just reports, and there is nothing illegal about that.
- DaiPlusPlus 6y ago
  Isn’t insider trading is defined as trading based on non-public information not available to other shareholders. (So you don’t have to be an actual insider - you could be trading on information you got by dumpster-diving). That would make it a grey-area if it’s information that will eventually be made public within an hour. I guess it depends on the type of trades you perform...
  - vmception 6y ago
    or 325,000 users counts as broadly disseminated Insider trading is complicated in the US because it is a creature of the executive branch and the courts. Congress largely quiet on exactly what constitutes it, and the regulator learning to leverage broad fraud statutes and a few wins in the court, alongside many losses.
  - thoughtstheseus 6y ago
    It also needs to be material information.
  - dodobirdlord 6y ago
    No, it's trading with information that you shouldn't have had access to. Think of it as being about misappropriate of information, theft, not fairness. If I have private satellites that I use to photograph cropland, and I use that information to trade agriculture futures, this is not insider trading even if nobody else is privy to the information. Similarly, if I have investigative journalists working for me and I trade based on their unpublished investigations, that's also not insider trading unless the journalists got the information from an insider. It's not about whether the public does have the information, it's about whether the information was gotten from someone who had a legal responsibility to not share it. The finance writer Matt Levine writes on this topic somewhat frequently, I scrounged up an example. https://www.bloomberg.com/opinion/articles/2019-03-13/you-have-to-pay-the-right-person https://www.bloomberg.com/opinion/articles/2019-03-13/you-ha...
  - kortilla 6y ago
    No, insider trading does not mean “non-public information not available to other shareholders”, at least not in the US. It has to be information generated internally that was meant to be kept confidential. There are many funds that base their entire existence on doing private research about companies and making trading decisions on this non-public research. Visceral example: you spot a CEO get fatally run over by a car. You can immediately bet against the company via short selling, options, etc. even though the knowledge of his/her death is definitely non-public at that time.
Permit 6y ago
I have only followed the story in passing but I believe LIBOR rates were fixed in a Bloomberg terminal chatroom called "The Cartel": https://www.buzzfeednews.com/article/matthewzeitlin/why-banks-want-to-get-their-traders-out-of-chatrooms https://www.buzzfeednews.com/article/matthewzeitlin/why-bank... It's hard for me to Google this because Bloomberg.com's own articles leave this out and simply refer to it as "a chatroom" not "a Bloomberg terminal chatroom".
- brownbat 6y ago
  That's what I thought of. Some chat snippets here: https://www.businessinsider.com/read-the-bloomberg-chats-that-got-a-former-rbs-libor-trader-paul-white-banned-for-life-2016-4#heres-another-bloomberg-exchange-with-trader-a-at-092038-on-march-16-2009-4 https://www.businessinsider.com/read-the-bloomberg-chats-tha...
gottareply2020 6y ago
It’s accessing the chat data. If a bad actor could access incoming chats from a major broker’s PT/Swaps desk, a great deal of money could be made.
- dx034 6y ago
  That's for any piece of trading software used at brokers, banks and asset managers. Bloomberg IB is a central piece of trading architecture but not more so than many others.

Can you explain an example insider trading situation involving Bloomberg terminals?

by kovek 6y ago

Can you explain an example insider trading situation involving Bloomberg terminals?

I do not think that Bloomberg terminals are any more useful for insider trading, in the strict sense, than any other communication device, and probably less so because they are more likely to be monitored by one's employer. However, there is one exception: Bloomberg News publishes a lot of scoops about public companies. That is its raison d'être. To move markets. Those Bloomberg scoops are released to terminal subscribers 15-20 minutes before the news hits the rest of the market. So it's a kind of syndication of inside information, obtained by Bloomberg reporters from anonymous sources somehow apprised of the companies that the journalists cover. But Bloomberg doesn't trade. Its clients do. Bloomberg just reports, and there is nothing illegal about that.

DaiPlusPlus 6y ago
Isn’t insider trading is defined as trading based on non-public information not available to other shareholders. (So you don’t have to be an actual insider - you could be trading on information you got by dumpster-diving). That would make it a grey-area if it’s information that will eventually be made public within an hour. I guess it depends on the type of trades you perform...
- vmception 6y ago
  or 325,000 users counts as broadly disseminated Insider trading is complicated in the US because it is a creature of the executive branch and the courts. Congress largely quiet on exactly what constitutes it, and the regulator learning to leverage broad fraud statutes and a few wins in the court, alongside many losses.
- thoughtstheseus 6y ago
  It also needs to be material information.
- dodobirdlord 6y ago
  No, it's trading with information that you shouldn't have had access to. Think of it as being about misappropriate of information, theft, not fairness. If I have private satellites that I use to photograph cropland, and I use that information to trade agriculture futures, this is not insider trading even if nobody else is privy to the information. Similarly, if I have investigative journalists working for me and I trade based on their unpublished investigations, that's also not insider trading unless the journalists got the information from an insider. It's not about whether the public does have the information, it's about whether the information was gotten from someone who had a legal responsibility to not share it. The finance writer Matt Levine writes on this topic somewhat frequently, I scrounged up an example. https://www.bloomberg.com/opinion/articles/2019-03-13/you-have-to-pay-the-right-person https://www.bloomberg.com/opinion/articles/2019-03-13/you-ha...
- kortilla 6y ago
  No, insider trading does not mean “non-public information not available to other shareholders”, at least not in the US. It has to be information generated internally that was meant to be kept confidential. There are many funds that base their entire existence on doing private research about companies and making trading decisions on this non-public research. Visceral example: you spot a CEO get fatally run over by a car. You can immediately bet against the company via short selling, options, etc. even though the knowledge of his/her death is definitely non-public at that time.

Permit 6y ago

I have only followed the story in passing but I believe LIBOR rates were fixed in a Bloomberg terminal chatroom called "The Cartel": https://www.buzzfeednews.com/article/matthewzeitlin/why-banks-want-to-get-their-traders-out-of-chatrooms https://www.buzzfeednews.com/article/matthewzeitlin/why-bank... It's hard for me to Google this because Bloomberg.com's own articles leave this out and simply refer to it as "a chatroom" not "a Bloomberg terminal chatroom".

brownbat 6y ago
That's what I thought of. Some chat snippets here: https://www.businessinsider.com/read-the-bloomberg-chats-that-got-a-former-rbs-libor-trader-paul-white-banned-for-life-2016-4#heres-another-bloomberg-exchange-with-trader-a-at-092038-on-march-16-2009-4 https://www.businessinsider.com/read-the-bloomberg-chats-tha...

gottareply2020 6y ago

It’s accessing the chat data. If a bad actor could access incoming chats from a major broker’s PT/Swaps desk, a great deal of money could be made.

dx034 6y ago
That's for any piece of trading software used at brokers, banks and asset managers. Bloomberg IB is a central piece of trading architecture but not more so than many others.