5 ms·

Both people involved are now deceased, and while I heard this story from one of the principals, I have my doubts. But fwiw: I knew a guy who was close buddies

Both people involved are now deceased, and while I heard this story from one of the principals, I have my doubts. But fwiw: I knew a guy who was close buddies with the outside accountant for a Fortune 500 company. One of the accountant's duties was to file a quarterly document with the SEC with the company's financial results. That was before this was done online. The contents of the document, before filing, were very confidential and using or disclosing them would have been illegal inside trading. However, as the story goes, the instant the document was in the SEC's possession, its contents were considered public and people with the info were allowed to use it (maybe not the accountant himself because of some special rules). And so, according to how I was told, the accountant, after dropping off the document and walking out of the SEC building, would pull out his cell phone and call his buddy from the front steps with the relevant info. The buddy would then make trades on the now-"public" info that no one else yet knew, because it was still on a piece of paper in the SEC office that no one had yet looked at. Could it really have been that easy? This would have been the 1980s or so, I think. I think they had cell phones then, but if not, they had pay phones.

leoc 5y ago
The original handheld "brick" phone, the https://en.wikipedia.org/wiki/Motorola_DynaTAC https://en.wikipedia.org/wiki/Motorola_DynaTAC , came out in 1984. This was the beginning of the period when cellular phones were seen as expensive status symbols and specialist equipment. (In fact the phones were often still carphones and transportables https://www.mobilephonehistory.co.uk/arcticles/80s_brick_phones.php https://www.mobilephonehistory.co.uk/arcticles/80s_brick_pho... .) Then in the early '90s, about the time that GSM digital service came in, prices began to drop sharply and wide adoption began. (One sign of the change which got some attention at the time was that the SWP https://en.wikipedia.org/wiki/Socialist_Workers_Party_(UK) https://en.wikipedia.org/wiki/Socialist_Workers_Party_(UK) , a somewhat ersatz radical-left UK fringe party, was seen using mobile phones to organise its then very successful steet demos.)
siruncledrew 5y ago
It probably happens even more now than in the 1980s. The speed of communication outpaces the speed of government bureaucracy so it’s easy to take advantage of a technicality to make huge profits. It’s like university exams when a friend in a morning class would take an exam and then tell others in the afternoon class about the questions and what to expect before taking the exam. The no guarantee the exams would be the say, but even if some questions overlap it makes a big difference. In the case of university, I’m pretty sure this would be some kind of honor policy violation with repercussions if found out, and for Wall St it’s probably not even as tough as uni.
- throwaway81523 5y ago
  I think the above specific scenario doesn't happen now, because the info is uploaded at a specific time and broadcast instantly to any interested parties. So modulo some millisecond differences that only HFT bots can exploit, everyone gets the info at the same time.
jkhdigital 5y ago
Outlawing insider trading is simply a bad idea, just like prohibition or trying to outlaw abortion.
- Cipater 5y ago
  Are you saying insider trading should be legal?
  - Y_Y 5y ago
    It sounds like "this is going to happen anyway, so it may as well happen in the open". That's not necessarily a bad position, I think. Maybe a market that didn't pretend insider trading didn't happen would look somewhat different.
agumonkey 5y ago
With paperwork usual delays it would be a superb edge. I can witness the same structure at my job. We all see stuff (not financial related) the public is not aware of. It would be easy to take advantage of that.

leoc 5y ago

The original handheld "brick" phone, the https://en.wikipedia.org/wiki/Motorola_DynaTAC https://en.wikipedia.org/wiki/Motorola_DynaTAC , came out in 1984. This was the beginning of the period when cellular phones were seen as expensive status symbols and specialist equipment. (In fact the phones were often still carphones and transportables https://www.mobilephonehistory.co.uk/arcticles/80s_brick_phones.php https://www.mobilephonehistory.co.uk/arcticles/80s_brick_pho... .) Then in the early '90s, about the time that GSM digital service came in, prices began to drop sharply and wide adoption began. (One sign of the change which got some attention at the time was that the SWP https://en.wikipedia.org/wiki/Socialist_Workers_Party_(UK) https://en.wikipedia.org/wiki/Socialist_Workers_Party_(UK) , a somewhat ersatz radical-left UK fringe party, was seen using mobile phones to organise its then very successful steet demos.)

siruncledrew 5y ago

It probably happens even more now than in the 1980s. The speed of communication outpaces the speed of government bureaucracy so it’s easy to take advantage of a technicality to make huge profits. It’s like university exams when a friend in a morning class would take an exam and then tell others in the afternoon class about the questions and what to expect before taking the exam. The no guarantee the exams would be the say, but even if some questions overlap it makes a big difference. In the case of university, I’m pretty sure this would be some kind of honor policy violation with repercussions if found out, and for Wall St it’s probably not even as tough as uni.

throwaway81523 5y ago
I think the above specific scenario doesn't happen now, because the info is uploaded at a specific time and broadcast instantly to any interested parties. So modulo some millisecond differences that only HFT bots can exploit, everyone gets the info at the same time.

jkhdigital 5y ago

Outlawing insider trading is simply a bad idea, just like prohibition or trying to outlaw abortion.

Cipater 5y ago
Are you saying insider trading should be legal?
- Y_Y 5y ago
  It sounds like "this is going to happen anyway, so it may as well happen in the open". That's not necessarily a bad position, I think. Maybe a market that didn't pretend insider trading didn't happen would look somewhat different.

agumonkey 5y ago

With paperwork usual delays it would be a superb edge. I can witness the same structure at my job. We all see stuff (not financial related) the public is not aware of. It would be easy to take advantage of that.