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That's absurd. Insider trading makes markets more efficient as the information enters the market earlier, allowing them to reach the correct price sooner. Ther

That's absurd. Insider trading makes markets more efficient as the information enters the market earlier, allowing them to reach the correct price sooner. There's no insider trading laws in commodities or real estate, have those markets collapsed?

lexapro 5y ago
Who would invest in a company if senior management is allowed to steal from investors? You might as well legalize stealing. Markets need trust.
cool_dude85 5y ago
>There's no insider trading laws in commodities or real estate, have those markets collapsed? I didn't check, but is this really true? If a mining company executive knows that for whatever reason they will see a 10% drop in yield next quarter, but it's not public knowledge, they can buy futures, no problem? All the execs can get together if there's something going on and invest on that info as long as they're investing in the commodity, not stock?
tsimionescu 5y ago
> Insider trading makes markets more efficient as the information enters the market earlier, allowing them to reach the correct price sooner. How exactly do you think this happens? If I know that a stock is about to rise significantly, I can just buy it at the current price all the way up to the day the information becomes public, and I will not have changed its price at all, but will profit massively off of my inside information. The market will not reach the correct price until material information becomes public.
- rosndo 5y ago
  > and I will not have changed its price at all Of course you will have, buying affects the price.
  - tsimionescu 5y ago
    Marginally, but nowhere near to the extent that the price will change when the insider infortmation becomes public (unless I'm doing something crazy, like buying all available stock at any price below what I think the price will be).
    - rosndo 5y ago
      In a world where insider trading is legal, why would you stick to small time trades?
      - lexapro 5y ago
        Limited available capital? You can only borrow so much money. Also, you can't know for certain how much the stock will move after the information becomes public.
        rosndo 5y ago
        Surely you would shop around and raise money from big funds? If they won’t bite, maybe your information just isn’t that impactful.
      - tsimionescu 5y ago
        Because you don't want others to notice what you're doing, obviously. If the CEO of X is buying massive amounts of X stock, people will start assuming they have inside information, and the price will go up. If the CEO of X bought a few shares at market price every day, that will be less likely to alert anyone, and they will be able to continue buying at very low prices.
        rosndo 5y ago
        So you’re arguing that insider trading has no effect at all?
        5y ago
- tucnak 5y ago
  >The market will not reach the correct price until material information becomes public. Not if the EMH is true.
  - notacoward 5y ago
    You're misunderstanding EMH. It does not include prescience. And BTW, it's generally not considered true except in its weakest forms.
rand49an 5y ago
Insider trading prevents information from being available to all parties by definition. That argument essentially essentially means that a certain amount of people should be allowed be defrauded to find the correct market price. Real estate is an especially bad example too because when selling a house you have to disclose any information about the property that may affect it's future value or risk legal action - but still real estate fraud continues.
tmsh 5y ago
Insider trading delegitimizes markets. It’s illegal for all regulated US commodities trading. It’s called front-running. It in theory would make the market more efficient for that one minute interval where a local trader eg makes trades ahead of a larger institutional order of an honest participant. But by screwing over the honest participant it would misrepresent the true price of the asset. It’s definitely illegal by the CFTC and any exchange that trades anything regulated. That doesn’t stop people from trying to get away with it under the radar tho (small front-running order ahead of large institutional order). The innovation in crypto is frontrunning at the transaction time is more difficult (trades are encrypted, not made in some open outcry pit). However this doesn’t stop exchanges from screwing over customers by creating demand and someone inside trading their pre-listed asset. To prevent that programmatically you’d need a crypto protocol for establishing new listings where everyone is aware of new listings in advance and agrees via some fair consensus.

lexapro 5y ago

Who would invest in a company if senior management is allowed to steal from investors? You might as well legalize stealing. Markets need trust.

cool_dude85 5y ago

>There's no insider trading laws in commodities or real estate, have those markets collapsed? I didn't check, but is this really true? If a mining company executive knows that for whatever reason they will see a 10% drop in yield next quarter, but it's not public knowledge, they can buy futures, no problem? All the execs can get together if there's something going on and invest on that info as long as they're investing in the commodity, not stock?

tsimionescu 5y ago

> Insider trading makes markets more efficient as the information enters the market earlier, allowing them to reach the correct price sooner. How exactly do you think this happens? If I know that a stock is about to rise significantly, I can just buy it at the current price all the way up to the day the information becomes public, and I will not have changed its price at all, but will profit massively off of my inside information. The market will not reach the correct price until material information becomes public.

rosndo 5y ago
> and I will not have changed its price at all Of course you will have, buying affects the price.
- tsimionescu 5y ago
  Marginally, but nowhere near to the extent that the price will change when the insider infortmation becomes public (unless I'm doing something crazy, like buying all available stock at any price below what I think the price will be).
  - rosndo 5y ago
    In a world where insider trading is legal, why would you stick to small time trades?
    - lexapro 5y ago
      Limited available capital? You can only borrow so much money. Also, you can't know for certain how much the stock will move after the information becomes public.
      - rosndo 5y ago
        Surely you would shop around and raise money from big funds? If they won’t bite, maybe your information just isn’t that impactful.
    - tsimionescu 5y ago
      Because you don't want others to notice what you're doing, obviously. If the CEO of X is buying massive amounts of X stock, people will start assuming they have inside information, and the price will go up. If the CEO of X bought a few shares at market price every day, that will be less likely to alert anyone, and they will be able to continue buying at very low prices.
      - rosndo 5y ago
        So you’re arguing that insider trading has no effect at all?
        5y ago
tucnak 5y ago
>The market will not reach the correct price until material information becomes public. Not if the EMH is true.
- notacoward 5y ago
  You're misunderstanding EMH. It does not include prescience. And BTW, it's generally not considered true except in its weakest forms.

rand49an 5y ago

Insider trading prevents information from being available to all parties by definition. That argument essentially essentially means that a certain amount of people should be allowed be defrauded to find the correct market price. Real estate is an especially bad example too because when selling a house you have to disclose any information about the property that may affect it's future value or risk legal action - but still real estate fraud continues.

tmsh 5y ago

Insider trading delegitimizes markets. It’s illegal for all regulated US commodities trading. It’s called front-running. It in theory would make the market more efficient for that one minute interval where a local trader eg makes trades ahead of a larger institutional order of an honest participant. But by screwing over the honest participant it would misrepresent the true price of the asset. It’s definitely illegal by the CFTC and any exchange that trades anything regulated. That doesn’t stop people from trying to get away with it under the radar tho (small front-running order ahead of large institutional order). The innovation in crypto is frontrunning at the transaction time is more difficult (trades are encrypted, not made in some open outcry pit). However this doesn’t stop exchanges from screwing over customers by creating demand and someone inside trading their pre-listed asset. To prevent that programmatically you’d need a crypto protocol for establishing new listings where everyone is aware of new listings in advance and agrees via some fair consensus.