4 ms·

I'm not a market expert, but... my gut tells me this would have some kind of corrective effect, wouldn't it? Amplifying the inside information, allowing others

I'm not a market expert, but... my gut tells me this would have some kind of corrective effect, wouldn't it? Amplifying the inside information, allowing others to capitalize on it, would even out the unfairness of the privileged position in some roundabout way, wouldn't it? Obviously scaled by the number of people actually doing this, and with how much money Or- would it have the opposite effect? Would it actually give even more money to the congresspeople? At the very least it should raise awareness of the problem by amplifying its impact on the market

tablespoon 5y ago
> I'm not a market expert, but... my gut tells me this would have some kind of corrective effect, wouldn't it? Amplifying the inside information, allowing others to capitalize on it, would even out the unfairness of the privileged position in some roundabout way, wouldn't it? Wouldn't it just help the Congressmen's portfolios? A bunch of people buying after they do would help drive up the price of their investments.
- brundolf 5y ago
  Yeah, you're right. Though I still wonder if it could have an effect of raising awareness (and ire from certain parties) about this problem Company A is about to be impacted by some legislation, congressperson B makes some "small" trades accordingly, then a bunch of people pick up on those trades and do the same thing, causing that company's price to spike or plummet in a way that's very clearly artificial and unfair either to the company or its competitors (or just traders who are upset about volatility) Seems like a decent way to force the wealthy to care about this kind of insider-trading as a political issue
cortesoft 5y ago
It would have the opposite effect. If everyone buys stock after you do, you make money because the stock price goes up. I would love it if everyone followed my stock purchases after the fact.
- nathancahill 5y ago
  Yeah, it's even big market. "Successful" traders start paid newletters with stock alerts so people can follow their trades.
  - noxer 5y ago
    Thats just a "legal scam" and you know because if they would actually be successful trading they would not bother selling newsletters.
    - codyswann 5y ago
      It is a scam and the same scam happens with sports betting, but it's a bit more nuanced than that. Trader A buys a 50,000 person email list. Sends 25,000 an alert that XYZ is going through the roof Sends 25,000 an alert that XYZ is going through the floor If XYZ stays flat, he repeats the process a bit later. Whichever side loses is eliminated. He repeats the process with 12,500 on each side of the position (more because presumably more people will sign up for his "picks") and you keep going from there.
      - ipaddr 5y ago
        Perhaps this made sense when you had to physically mail this. With each round he loses half. Wouldn't it be better to just send all 50,000? Some of the 25,000 who were sent the wrong pick might have misunderstood, did not read it the first time around, would purchase because of brand awareness. With the cost of delivery the same you would be foolish to overlook this.
      - fighterpilot 5y ago
        Usually the scam is just a pure pump & dump with no sophistication: Trader A sends 50,000 an alert that small-cap XYZ is going through the roof, then XYZ really does go through the roof because a large subset of 50,000 people buy it at the same time.
deleted 5y ago
[deleted]
LewisVerstappen 5y ago
Well, every hedge fund/market maker has already been aware of this and they're managing far more money than the TikTokers so they move markets a lot more than TikTok. So yeah, I don't think this really changes anything and all this information should already be priced in by the time the majority of TikTokers are trading on it. I really wish there was some data on the type of returns Robinhood traders are getting (people who trade actively). I'd definitely wager they're not beating the S&P 500 and they're getting even more screwed by short term capital gains tax rates (since their holding period is probably less than a year).
hfjrkekdkfj 5y ago
It could act like a Schelling point . Think about this problem: a bunch of tiktokers want to do like Reddit with GameStop. But what stock to gang up on? Who proposes the stock? Having a neutral source for stock names can fix this synchronization power. Congressman traded stocks are a pretty good source, since you can't assume that your average tiktocker has any influence on that.
UnpossibleJim 5y ago
Yes, but it's also a form of "crowd sourced insider trading" around a person who won't be indicted, as they aren't part of the scheme... so far as I can tell. It's a loophole because no law has been written about it, as of yet.
- brundolf 5y ago
  Right, but if it gets enough awareness and has enough direct negative impact on people (particularly people with money and influence), it could become enough of a hot-button issue that lawmakers are pressured to write that law
  - ummwhat 5y ago
    Lawmakers are not going to write a law whose sole purpose is indicting lawmakers.
    - deleted 5y ago
      [deleted]
cmelbye 5y ago
It certainly seems to be raising awareness of the problem. In terms of making insider trading fair, I think that is inherently impossible.
IAmGraydon 5y ago
Yes, that’s what’s known as the efficient market.

tablespoon 5y ago

> I'm not a market expert, but... my gut tells me this would have some kind of corrective effect, wouldn't it? Amplifying the inside information, allowing others to capitalize on it, would even out the unfairness of the privileged position in some roundabout way, wouldn't it? Wouldn't it just help the Congressmen's portfolios? A bunch of people buying after they do would help drive up the price of their investments.

brundolf 5y ago
Yeah, you're right. Though I still wonder if it could have an effect of raising awareness (and ire from certain parties) about this problem Company A is about to be impacted by some legislation, congressperson B makes some "small" trades accordingly, then a bunch of people pick up on those trades and do the same thing, causing that company's price to spike or plummet in a way that's very clearly artificial and unfair either to the company or its competitors (or just traders who are upset about volatility) Seems like a decent way to force the wealthy to care about this kind of insider-trading as a political issue

cortesoft 5y ago

It would have the opposite effect. If everyone buys stock after you do, you make money because the stock price goes up. I would love it if everyone followed my stock purchases after the fact.

nathancahill 5y ago
Yeah, it's even big market. "Successful" traders start paid newletters with stock alerts so people can follow their trades.
- noxer 5y ago
  Thats just a "legal scam" and you know because if they would actually be successful trading they would not bother selling newsletters.
  - codyswann 5y ago
    It is a scam and the same scam happens with sports betting, but it's a bit more nuanced than that. Trader A buys a 50,000 person email list. Sends 25,000 an alert that XYZ is going through the roof Sends 25,000 an alert that XYZ is going through the floor If XYZ stays flat, he repeats the process a bit later. Whichever side loses is eliminated. He repeats the process with 12,500 on each side of the position (more because presumably more people will sign up for his "picks") and you keep going from there.
    - ipaddr 5y ago
      Perhaps this made sense when you had to physically mail this. With each round he loses half. Wouldn't it be better to just send all 50,000? Some of the 25,000 who were sent the wrong pick might have misunderstood, did not read it the first time around, would purchase because of brand awareness. With the cost of delivery the same you would be foolish to overlook this.
    - fighterpilot 5y ago
      Usually the scam is just a pure pump & dump with no sophistication: Trader A sends 50,000 an alert that small-cap XYZ is going through the roof, then XYZ really does go through the roof because a large subset of 50,000 people buy it at the same time.

deleted 5y ago

[deleted]

LewisVerstappen 5y ago

Well, every hedge fund/market maker has already been aware of this and they're managing far more money than the TikTokers so they move markets a lot more than TikTok. So yeah, I don't think this really changes anything and all this information should already be priced in by the time the majority of TikTokers are trading on it. I really wish there was some data on the type of returns Robinhood traders are getting (people who trade actively). I'd definitely wager they're not beating the S&P 500 and they're getting even more screwed by short term capital gains tax rates (since their holding period is probably less than a year).

hfjrkekdkfj 5y ago

It could act like a Schelling point . Think about this problem: a bunch of tiktokers want to do like Reddit with GameStop. But what stock to gang up on? Who proposes the stock? Having a neutral source for stock names can fix this synchronization power. Congressman traded stocks are a pretty good source, since you can't assume that your average tiktocker has any influence on that.

UnpossibleJim 5y ago

Yes, but it's also a form of "crowd sourced insider trading" around a person who won't be indicted, as they aren't part of the scheme... so far as I can tell. It's a loophole because no law has been written about it, as of yet.

brundolf 5y ago
Right, but if it gets enough awareness and has enough direct negative impact on people (particularly people with money and influence), it could become enough of a hot-button issue that lawmakers are pressured to write that law
- ummwhat 5y ago
  Lawmakers are not going to write a law whose sole purpose is indicting lawmakers.
  - deleted 5y ago
    [deleted]

cmelbye 5y ago

It certainly seems to be raising awareness of the problem. In terms of making insider trading fair, I think that is inherently impossible.

IAmGraydon 5y ago

Yes, that’s what’s known as the efficient market.