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Take it further. If you witness a car from Tesla or any other publicly traded corp spontaneously combust on the side of the road and you know it will result in

by Drip33 6y ago

Take it further. If you witness a car from Tesla or any other publicly traded corp spontaneously combust on the side of the road and you know it will result in massive recalls before the general public and then short the stock, is that insider trading too? Edit: Or use satellite images to see when companies are receiving big shipments, sending out deliveries, or track customers to predict stock prices and revenues https://www.theatlantic.com/magazine/archive/2019/05/stock-value-satellite-images-investing/586009/ https://www.theatlantic.com/magazine/archive/2019/05/stock-v...

lukejduncan 6y ago
Matt Levine talks a lot about insider trading, and the emphasis he always puts on it is about theft. Insider trading, in the US, isn’t about trading on uncommon knowledge or inferences. That’s actually many professional traders job: information arbitrage. It’s about trading on information that is owned by your employer. Your responsibility as an employee or executive is to the company and using inside corporate information for personal gain rather than corporate gain is a form of theft. Here’s his piece on the distinction between thinking about insider trading as being about fairness vs theft. https://www.google.com/amp/s/www.bloomberg.com/amp/opinion/articles/2015-04-01/another-politician-wants-to-ban-insider-trading https://www.google.com/amp/s/www.bloomberg.com/amp/opinion/a...
- perl4ever 6y ago
  However, he also writes about how, say, being a golf buddy of an insider has been argued to somehow be a "position of trust" that can be betrayed by using inside information. It sounds like there is a nebulous area that you don't want to get caught up in, if you are the sort to pal around with executives and such. Winning after years in court, on appeal, could easily be a pyrrhic victory. There's a reason he says don't take anything as legal advice.
- ThePowerOfFuet 6y ago
  Could you please try to post direct links, rather than AMP links which are privacy-violating?
  - sharken 6y ago
    A Javascript warning when using AMP links in a post could help.
  - lukejduncan 6y ago
    I actually prefer to post amp links for paywalled articles. It’s the only legal way around the paywall.
riffic 6y ago
I think "insider" has an actual, statutory, legal definition, and it would not include random bystanders or observers. Of course, I'm not a lawyer and my comment is not intended to be legal advice.
- barry-cotter 6y ago
  What an insider is is all case law and precedent, not legislation.
refurb 6y ago
Something similar went to court! You can probably google the details and find the actual case. Guy works at a rail yard, he notices that they are spending a bunch of time doing an inventory of equipment and then a bunch of guys in suits keep visiting. He assumes someone is buying the company, so loads up on stock and so does his family. Company gets acquired and the SEC charges him with insider trading. I believe he was convicted (nope, went to jury trial), but appealed and won. His argument was he had no more access to this information than the general public would (say from watching the yard outside the gate). Edit: found it! https://www.jdsupra.com/legalnews/two-thoughts-about-the-jury-verdict-in-s-99906/ https://www.jdsupra.com/legalnews/two-thoughts-about-the-jur... Acquitted after a jury trial.
- maxerickson 6y ago
  That's quite different than someone who doesn't work for a company observing something about their product.
- koolba 6y ago
  > ... then a bunch of guys in suits keep visiting. I bet it’d be easy to train an image tracking model to find this off satellite imagery.
  - kristjansson 6y ago
    Welcome to the wonderful world of ‘alternative data’
  - blackearl 6y ago
    You can similarly track certain flights to certain places. https://www.cnbc.com/2019/04/30/a-corporate-jet-revealed-buffett-energy-deal-days-before-announcement.html https://www.cnbc.com/2019/04/30/a-corporate-jet-revealed-buf...
  - deleted 6y ago
    [deleted]
  - simon--poole 6y ago
rapnie 6y ago
How about you're a FAAMG or any other big data harvester and you analyse this data from millions of businesses for insider trading and other business opportunities? If you don't overplay your hand no one will find out, competitive advantage galore.
- corin_ 6y ago
  Facebook were accused of exactly this in one line of questioning to Zuckerberg during last week's congressional hearing. Though I'm not sure if the implication was that they had done something illegal, or that they had done something which ought to be illegal. Zuckerberg first said he wasn't aware of the situation being referred to (an old free VPN app that FB allegedly acquired to use for data harvesting); and then later asked to correct his testimony saying something along the lines of that he does remember, but the name of the app used (in the question) wasn't familiar to him so he had needed his memory jogged (presumably by an off-camera lawyer while he was muted). I wondered whether it was intentional - claim ignorance to avoid the hard questions then fix the record later to avoid perjury while also avoiding follow up questions... Edit: since parent wrote "data from millions of businesses" I should clarify that I don't have knowledge of what data FB are accused of harvesting, I think the idea was that it was data from consumers giving them a competitive advantage in considering what companies to acquire.
  - nl 6y ago
    Facebook wasn't buying and selling stock in public companies they gathered data on, and additionally didn't have a contractual arrangement with those companies to keep data about traffic to them private. There's plenty of precedent for this kind of behavior: Comscore buys traffic data from ISPs and sells the aggregated insights. Supermarkets count sales and create in-house brands to compete with the vendors they sell products for.
dasudasu 6y ago
You could analyze trading patterns, discover that insider trading is almost certainly taking place, trade on that, and you wouldn't be committing insider trading yourself. Your own deductions are fair game.

by Drip33 6y ago

lukejduncan 6y ago

Matt Levine talks a lot about insider trading, and the emphasis he always puts on it is about theft. Insider trading, in the US, isn’t about trading on uncommon knowledge or inferences. That’s actually many professional traders job: information arbitrage. It’s about trading on information that is owned by your employer. Your responsibility as an employee or executive is to the company and using inside corporate information for personal gain rather than corporate gain is a form of theft. Here’s his piece on the distinction between thinking about insider trading as being about fairness vs theft. https://www.google.com/amp/s/www.bloomberg.com/amp/opinion/articles/2015-04-01/another-politician-wants-to-ban-insider-trading https://www.google.com/amp/s/www.bloomberg.com/amp/opinion/a...

perl4ever 6y ago
However, he also writes about how, say, being a golf buddy of an insider has been argued to somehow be a "position of trust" that can be betrayed by using inside information. It sounds like there is a nebulous area that you don't want to get caught up in, if you are the sort to pal around with executives and such. Winning after years in court, on appeal, could easily be a pyrrhic victory. There's a reason he says don't take anything as legal advice.
ThePowerOfFuet 6y ago
Could you please try to post direct links, rather than AMP links which are privacy-violating?
- sharken 6y ago
  A Javascript warning when using AMP links in a post could help.
- lukejduncan 6y ago
  I actually prefer to post amp links for paywalled articles. It’s the only legal way around the paywall.

riffic 6y ago

I think "insider" has an actual, statutory, legal definition, and it would not include random bystanders or observers. Of course, I'm not a lawyer and my comment is not intended to be legal advice.

barry-cotter 6y ago
What an insider is is all case law and precedent, not legislation.

refurb 6y ago

Something similar went to court! You can probably google the details and find the actual case. Guy works at a rail yard, he notices that they are spending a bunch of time doing an inventory of equipment and then a bunch of guys in suits keep visiting. He assumes someone is buying the company, so loads up on stock and so does his family. Company gets acquired and the SEC charges him with insider trading. I believe he was convicted (nope, went to jury trial), but appealed and won. His argument was he had no more access to this information than the general public would (say from watching the yard outside the gate). Edit: found it! https://www.jdsupra.com/legalnews/two-thoughts-about-the-jury-verdict-in-s-99906/ https://www.jdsupra.com/legalnews/two-thoughts-about-the-jur... Acquitted after a jury trial.

maxerickson 6y ago
That's quite different than someone who doesn't work for a company observing something about their product.
koolba 6y ago
> ... then a bunch of guys in suits keep visiting. I bet it’d be easy to train an image tracking model to find this off satellite imagery.
- kristjansson 6y ago
  Welcome to the wonderful world of ‘alternative data’
- blackearl 6y ago
  You can similarly track certain flights to certain places. https://www.cnbc.com/2019/04/30/a-corporate-jet-revealed-buffett-energy-deal-days-before-announcement.html https://www.cnbc.com/2019/04/30/a-corporate-jet-revealed-buf...
- deleted 6y ago
  [deleted]
- simon--poole 6y ago

rapnie 6y ago

How about you're a FAAMG or any other big data harvester and you analyse this data from millions of businesses for insider trading and other business opportunities? If you don't overplay your hand no one will find out, competitive advantage galore.

corin_ 6y ago
Facebook were accused of exactly this in one line of questioning to Zuckerberg during last week's congressional hearing. Though I'm not sure if the implication was that they had done something illegal, or that they had done something which ought to be illegal. Zuckerberg first said he wasn't aware of the situation being referred to (an old free VPN app that FB allegedly acquired to use for data harvesting); and then later asked to correct his testimony saying something along the lines of that he does remember, but the name of the app used (in the question) wasn't familiar to him so he had needed his memory jogged (presumably by an off-camera lawyer while he was muted). I wondered whether it was intentional - claim ignorance to avoid the hard questions then fix the record later to avoid perjury while also avoiding follow up questions... Edit: since parent wrote "data from millions of businesses" I should clarify that I don't have knowledge of what data FB are accused of harvesting, I think the idea was that it was data from consumers giving them a competitive advantage in considering what companies to acquire.
- nl 6y ago
  Facebook wasn't buying and selling stock in public companies they gathered data on, and additionally didn't have a contractual arrangement with those companies to keep data about traffic to them private. There's plenty of precedent for this kind of behavior: Comscore buys traffic data from ISPs and sells the aggregated insights. Supermarkets count sales and create in-house brands to compete with the vendors they sell products for.

dasudasu 6y ago

You could analyze trading patterns, discover that insider trading is almost certainly taking place, trade on that, and you wouldn't be committing insider trading yourself. Your own deductions are fair game.