3 ms·

Economically speaking insider trading represents a net positive for the market as it brings information onto the market sooner, allows it to reach a better pric

Economically speaking insider trading represents a net positive for the market as it brings information onto the market sooner, allows it to reach a better price sooner. The only people hurt by insider trading are those to whom the person doing insider trading has a fiduciary duty, which for a Coinbase employee would be Coinbase itself. Other markets like commodities and real estate have gotten along perfectly fine without any insider trading laws.

lexapro 5y ago
Anyone that loses money they wouldn't have lost otherwise is hurt by insider trading. And if you make it legal, people will try anything to gain insider information.
lvl102 5y ago
None of this is true. Don’t compare some shitcoin with nonexistent liquidity to real-world commodities.
- cuteboy19 5y ago
  There is no economic utility in this system to begin with. So even if this were true, they would be optimising a quantity that would eventually be multiplied by 0 anyways.
tsimionescu 5y ago
> Economically speaking insider trading represents a net positive for the market as it brings information onto the market sooner, allows it to reach a better price sooner. No, economically speaking insider trading just hurts the market, as all free market models work only in so far as all actors have equal access to information. Unequal information makes the market less efficient. Hidden information that is not used in trades doesn't affect market efficiency, as all actors get a chance to decide a new price once the information becomes public. > The only people hurt by insider trading are those to whom the person doing insider trading has a fiduciary duty, which for a Coinbase employee would be Coinbase itself. No, the people most hurt by insider trading are the cpunter-parties to those trades, who are acting on inferior information. It is a type of fraud - I'm acting as if the publicly known information is up to date, but in fact I know something the rest of the market doesn't about the value of the good I'm trading. It's like selling beans that have been publicly shown to be magical, while I happen to know the public show was staged and they are in fact normal beans.
- RandomLensman 5y ago
  > No, economically speaking insider trading just hurts the market I think that at least needs a qualification around what is meant by "hurt". If you were to look at the speed with which information might enter the market, insider trading restrictions might slow things down, for example. Not arguing for insider trading here, but the academic discussion - as I recall it - was/is a bit more nuanced.
- nybble41 5y ago
  > all free market models work only in so far as all actors have equal access to information. You need to investigate some better models. The useful ones don't assume equal access to information. Uniform access to information doesn't exist, and moreover distribution of information is one of the functions of the market. Information itself is a good which can only be acquired at a cost. Perfect information (not perfectly equal information) would indeed improve efficiency, but that doesn't happen on its own. Unequal information is better for market efficiency than less information; in a trade between A and B, both A and B knowing a relevant fact is ideal but only A or B knowing leads to better trades than neither knowing, provided neither party is actively deceiving the other about the nature of the goods being exchanged. > It is a type of fraud - I'm acting as if the publicly known information is up to date, but in fact I know something the rest of the market doesn't about the value of the good I'm trading. "Acting as if" is not the same as making an actionable claim. You are under no obligation to advise anyone on future market conditions. It's only fraud if you make the trade under false pretenses which, unless you actually claimed to be making the trade based on only public information, is not happening here. The product being sold is exactly as described; whatever might happen in the future to affect its market value is out of scope. > It's like selling beans that have been publicly shown to be magical, while I happen to know the public show was staged and they are in fact normal beans. There's nothing wrong that so long as you're not misrepresenting your product as having some sort of magic properties (which would include being involved in that staged demonstration). There is no fraud here as long as you do not claim that they are magical. What anyone else might claim about them and the motivations for buying them are not your concern. Your role is simply to provide the advertised product.
RhysU 5y ago
> Economically speaking insider trading represents a net positive for the market as it brings information onto the market sooner... However, insider trading erodes confidence in the market and therefore reduces the number of people contributing to and learning from pricing signals. Trust is a big deal.
notacoward 5y ago
> brings information onto the market sooner Nope. "Non-public information" is part of the definition of insider trading FFS. Only the secondary information represented by the transaction itself becomes public. The counterparty gets what they think is a good price but turns out to be a bad one because of the hidden information. That's a tangible loss to them, and any further trades they make while their putative and actual situations diverge will create more misleading market signals. This is such basic knowledge that it should be required for anyone trading anything riskier than an index fund or seeking a job in finance.

lexapro 5y ago

Anyone that loses money they wouldn't have lost otherwise is hurt by insider trading. And if you make it legal, people will try anything to gain insider information.

lvl102 5y ago

None of this is true. Don’t compare some shitcoin with nonexistent liquidity to real-world commodities.

cuteboy19 5y ago
There is no economic utility in this system to begin with. So even if this were true, they would be optimising a quantity that would eventually be multiplied by 0 anyways.

tsimionescu 5y ago

> Economically speaking insider trading represents a net positive for the market as it brings information onto the market sooner, allows it to reach a better price sooner. No, economically speaking insider trading just hurts the market, as all free market models work only in so far as all actors have equal access to information. Unequal information makes the market less efficient. Hidden information that is not used in trades doesn't affect market efficiency, as all actors get a chance to decide a new price once the information becomes public. > The only people hurt by insider trading are those to whom the person doing insider trading has a fiduciary duty, which for a Coinbase employee would be Coinbase itself. No, the people most hurt by insider trading are the cpunter-parties to those trades, who are acting on inferior information. It is a type of fraud - I'm acting as if the publicly known information is up to date, but in fact I know something the rest of the market doesn't about the value of the good I'm trading. It's like selling beans that have been publicly shown to be magical, while I happen to know the public show was staged and they are in fact normal beans.

RandomLensman 5y ago
> No, economically speaking insider trading just hurts the market I think that at least needs a qualification around what is meant by "hurt". If you were to look at the speed with which information might enter the market, insider trading restrictions might slow things down, for example. Not arguing for insider trading here, but the academic discussion - as I recall it - was/is a bit more nuanced.
nybble41 5y ago
> all free market models work only in so far as all actors have equal access to information. You need to investigate some better models. The useful ones don't assume equal access to information. Uniform access to information doesn't exist, and moreover distribution of information is one of the functions of the market. Information itself is a good which can only be acquired at a cost. Perfect information (not perfectly equal information) would indeed improve efficiency, but that doesn't happen on its own. Unequal information is better for market efficiency than less information; in a trade between A and B, both A and B knowing a relevant fact is ideal but only A or B knowing leads to better trades than neither knowing, provided neither party is actively deceiving the other about the nature of the goods being exchanged. > It is a type of fraud - I'm acting as if the publicly known information is up to date, but in fact I know something the rest of the market doesn't about the value of the good I'm trading. "Acting as if" is not the same as making an actionable claim. You are under no obligation to advise anyone on future market conditions. It's only fraud if you make the trade under false pretenses which, unless you actually claimed to be making the trade based on only public information, is not happening here. The product being sold is exactly as described; whatever might happen in the future to affect its market value is out of scope. > It's like selling beans that have been publicly shown to be magical, while I happen to know the public show was staged and they are in fact normal beans. There's nothing wrong that so long as you're not misrepresenting your product as having some sort of magic properties (which would include being involved in that staged demonstration). There is no fraud here as long as you do not claim that they are magical. What anyone else might claim about them and the motivations for buying them are not your concern. Your role is simply to provide the advertised product.

RhysU 5y ago

> Economically speaking insider trading represents a net positive for the market as it brings information onto the market sooner... However, insider trading erodes confidence in the market and therefore reduces the number of people contributing to and learning from pricing signals. Trust is a big deal.

notacoward 5y ago

> brings information onto the market sooner Nope. "Non-public information" is part of the definition of insider trading FFS. Only the secondary information represented by the transaction itself becomes public. The counterparty gets what they think is a good price but turns out to be a bad one because of the hidden information. That's a tangible loss to them, and any further trades they make while their putative and actual situations diverge will create more misleading market signals. This is such basic knowledge that it should be required for anyone trading anything riskier than an index fund or seeking a job in finance.