4 ms·

Insider trading is more or less dead. The only people who do it are a very small overlap of the Venn diagram of people who have access to material nonpubluc inf

by kolbe 6y ago

Insider trading is more or less dead. The only people who do it are a very small overlap of the Venn diagram of people who have access to material nonpubluc information and don’t yet know it’s impossible to monetize it. Every hedge fund knows where the line is and they never cross it. I know NPR wants to imply this is because the GOP is soft on crimes like this, but it’s probably more due to these crimes no longer happening.

gruez 6y ago
>Insider trading is more or less dead Is there any evidence supporting this claim? >The only people who do it are a very small overlap of the Venn diagram of people who have access to material nonpubluc information and don’t yet know it’s impossible to monetize it Which side is it? That there are less people people who have insider information, or that it's harder to monetize insider information? Unless there's big shift in US corporate culture leading to better information controls across the board, I don't think it's the former. I can't think of anything that'd change the latter, unless HFT/hedge funds found some sort of crystal ball so they can front-run the insiders.
- smabie 6y ago
  Hedge funds aren't run like they were in the early 2000s. It's not about individual traders posting PnL, it's about entire teams working together. In the past, individual traders would try and get inside information in order to post good returns. It's not like everyone at the hedge fund worked together to insider trade, that'd be too risky. As a result of the individual book model dying, inside information isn't worth much. You can't trade on your own, and you can't share it with others. Moreover, with outflows from discretionary to quantitative strategies, there's not that many hedge funds (by capital at least) that could even do anything with inside information. It's not like if some guy at Bridgewater got a hot merger tip he would even be able to do anything with it. tl:dr: lots of things have changed, and the industry is no longer conducive to exploiting insider information. I'm sure it still happens, but at an individual or informal kind of level. It's not an institutionalized accpeted thing like at SAC or Gallion, for example.
  - strbean 6y ago
    > Hedge funds aren't run like they were in the early 2000s. It appears that they changed how they were run the instant Trump was elected. Funny how that works!
    - SpicyLemonZest 6y ago
      Total SEC enforcement actions are still dancing around their peak, so a hypothesis that the administration has become more friendly to financial misconduct seems disconfirmed.
      - tehjoker 6y ago
        I would be extremely interested to know what that total is comprised of. If it's, for example, tons of warning letters with nothing further, that would be a great way to look busy doing something while doing nothing.
    - Nightshaxx 6y ago
      I saw you post this comment multiple times. Correlation does not equal causation my friend.
      - strbean 6y ago
        Correlation more often is the result of causation than it is of "handy wavy arguments about human nature".
        Nightshaxx 6y ago
        "Correlation does not mean causation" has nothing to do with the amount that correlation is the result of causation. It means that the former does not directly imply the latter, you need to add more to your argument than just the correlation argument. There could be other factors at play that were the actual cause of the change. These factors could be the underlying causes for both events, or the events may be completely separate. The only thing you said was "because X and Y happened at the same time, they seem to be connected". You did not make any other arguments about how X could cause Y. Within the past hour, I went to the bathroom, and also at least one person on earth died. As you can see, to say my bathroom trip caused that persons death is illogical without any other facts or evidence to back it up. This is a really funny site btw: https://www.tylervigen.com/spurious-correlations https://www.tylervigen.com/spurious-correlations
- strbean 6y ago
  Looking at the chart in the article, CLEARLY one of those factors made a massive shift right when Trump got elected! Suddenly everyone realized it was bad and they shouldn't do it.
- kolbe 6y ago
  > Which side is it? That there are less people people who have insider information, or that it's harder to monetize insider information? It’s both. There’s no reason to acquire the information if you cannot monetize it sufficiently. It becomes a liability to have it around. And the whole reason you cannot monetize it sufficiently is that the moment any event occurs, the SEC/FINRA combs through everyone whose trading patterns were suspicious. With the amount of surveillance, you’re almost guaranteed to get caught. There’s no secret meeting in a parking lot. There’s no Signal communications. I’m not saying there is no criminality in the financial world. Just that this particular crime is so heavily watched and carries such a strong punishment that no rational investor risks it. It mostly ends up being retail guys who got a tip, but didn’t know that the tip was illegal or they just had no clue the depth that the DoJ’s tentacles can reach. My evidence is that I’m in this world. HFs have departments that read research and then cross checks it to make sure it only includes public information. If somehow a nonpublic piece slips in, they kill the trade.
unwoundmouse 6y ago
you must be one of those "sheeple"

by kolbe 6y ago

gruez 6y ago

>Insider trading is more or less dead Is there any evidence supporting this claim? >The only people who do it are a very small overlap of the Venn diagram of people who have access to material nonpubluc information and don’t yet know it’s impossible to monetize it Which side is it? That there are less people people who have insider information, or that it's harder to monetize insider information? Unless there's big shift in US corporate culture leading to better information controls across the board, I don't think it's the former. I can't think of anything that'd change the latter, unless HFT/hedge funds found some sort of crystal ball so they can front-run the insiders.

smabie 6y ago
Hedge funds aren't run like they were in the early 2000s. It's not about individual traders posting PnL, it's about entire teams working together. In the past, individual traders would try and get inside information in order to post good returns. It's not like everyone at the hedge fund worked together to insider trade, that'd be too risky. As a result of the individual book model dying, inside information isn't worth much. You can't trade on your own, and you can't share it with others. Moreover, with outflows from discretionary to quantitative strategies, there's not that many hedge funds (by capital at least) that could even do anything with inside information. It's not like if some guy at Bridgewater got a hot merger tip he would even be able to do anything with it. tl:dr: lots of things have changed, and the industry is no longer conducive to exploiting insider information. I'm sure it still happens, but at an individual or informal kind of level. It's not an institutionalized accpeted thing like at SAC or Gallion, for example.
- strbean 6y ago
  > Hedge funds aren't run like they were in the early 2000s. It appears that they changed how they were run the instant Trump was elected. Funny how that works!
  - SpicyLemonZest 6y ago
    Total SEC enforcement actions are still dancing around their peak, so a hypothesis that the administration has become more friendly to financial misconduct seems disconfirmed.
    - tehjoker 6y ago
      I would be extremely interested to know what that total is comprised of. If it's, for example, tons of warning letters with nothing further, that would be a great way to look busy doing something while doing nothing.
  - Nightshaxx 6y ago
    I saw you post this comment multiple times. Correlation does not equal causation my friend.
    - strbean 6y ago
      Correlation more often is the result of causation than it is of "handy wavy arguments about human nature".
      - Nightshaxx 6y ago
        "Correlation does not mean causation" has nothing to do with the amount that correlation is the result of causation. It means that the former does not directly imply the latter, you need to add more to your argument than just the correlation argument. There could be other factors at play that were the actual cause of the change. These factors could be the underlying causes for both events, or the events may be completely separate. The only thing you said was "because X and Y happened at the same time, they seem to be connected". You did not make any other arguments about how X could cause Y. Within the past hour, I went to the bathroom, and also at least one person on earth died. As you can see, to say my bathroom trip caused that persons death is illogical without any other facts or evidence to back it up. This is a really funny site btw: https://www.tylervigen.com/spurious-correlations https://www.tylervigen.com/spurious-correlations
strbean 6y ago
Looking at the chart in the article, CLEARLY one of those factors made a massive shift right when Trump got elected! Suddenly everyone realized it was bad and they shouldn't do it.
kolbe 6y ago
> Which side is it? That there are less people people who have insider information, or that it's harder to monetize insider information? It’s both. There’s no reason to acquire the information if you cannot monetize it sufficiently. It becomes a liability to have it around. And the whole reason you cannot monetize it sufficiently is that the moment any event occurs, the SEC/FINRA combs through everyone whose trading patterns were suspicious. With the amount of surveillance, you’re almost guaranteed to get caught. There’s no secret meeting in a parking lot. There’s no Signal communications. I’m not saying there is no criminality in the financial world. Just that this particular crime is so heavily watched and carries such a strong punishment that no rational investor risks it. It mostly ends up being retail guys who got a tip, but didn’t know that the tip was illegal or they just had no clue the depth that the DoJ’s tentacles can reach. My evidence is that I’m in this world. HFs have departments that read research and then cross checks it to make sure it only includes public information. If somehow a nonpublic piece slips in, they kill the trade.

unwoundmouse 6y ago

you must be one of those "sheeple"