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I read the article. What's the financial incentive for a company to actually enforce "insider trading" rules to its employees? In fact, what does "insider trad

by usui 4y ago

I read the article. What's the financial incentive for a company to actually enforce "insider trading" rules to its employees? In fact, what does "insider trading" even mean in this context? Shouldn't that be defined by a central authority? When I read the title, it was, "No shit? What do you expect in an unregulated market by design?" I realize that "lots of insider trading is obviously happening, naturally" is a big statement and unfalsifiabe, so going in the other direction is more logically sound. On other hand, I can't help but feel it doesn't need to be proven. Unregulated economics is in the design! Maybe we just need more articles like this to prove the trend, but do we still feel the need to prove it? It reminds me of the way scientific consensus fought and eventually converged on "smoking causes lung cancer", even though that wasn't agreed upon at the beginning because monied interests disagreed. But it was like... well, you're burning toxic chemicals inside your lungs, it's in the design isn't it?! Which take makes more sense currently?

NelsonMinar 4y ago
That was sort of my reaction to: "why yes, of course this unregulated market has bad actors ripping off other people". But consider the WSJ audience and the way cryptocurrency is increasingly being peddled as a legitimate investment. Insider trading steals money from end retail investors and gives it to powerful insiders. It is actively harmful to ordinary investors. Ultimately markets that tolerate this kind of fraud fail as people get mad about being the sucker who gets ripped off and refuse to participate. Compared to the other kinds of fraud endemic to cryptocurrency, the risk of a corrupt market is a slow burn. Probably the Ponzi scheme will collapse or the rug will be pulled or the contract will be hacked long before the sheep realize they are being fleeced by insiders.
- ineedasername 4y ago
  That's a good point. Those following from a crypto disaster journalism vantage point will view this story as "yes, and water has been know to be wet on occasion, and the sun to come up on quite possibly every day." But if your exposure is more from following tradition financi news, you may have seen some of the disasters and certainly volatility but otherwise may seem like a gradually emerging but not quite mature new asset class.
- Handytinge 4y ago
  > But consider the WSJ audience and the way cryptocurrency is increasingly being peddled as a legitimate investment. If this audience doesn't understand what they're investing in and the rules around it, they're not very good investors, are they?
Tenoke 4y ago
>What's the financial incentive for a company to actually enforce "insider trading" rules to its employees? E.g. for Coinbase/Binance the financial incentive is that users might invest less in their offerings if they consistently do worse when participating there compared to initial offerings elsewhere or simply due to seeing proof of it. Similar/related rules might disincentivize insider trading for the projects themselves if insider trading is harmful in the first place which I am not sure of. If it is, and the common arguments that it leads to less outside investments are true then that should at least partially incentivize long-term thinking projects against it. Further, Coinbase/Binance have the incentive to dissuade projects from taking advantage of the information and as far as I know indeed try to though I guess their success is mixed.
- usui 4y ago
  > E.g. for Coinbase/Binance the financial incentive is that users might invest less in their offerings if they consistently do worse when participating there compared to initial offerings elsewhere or simply due to seeing proof of it. Aside from bad PR spreading like wildfire, won't market participants noticing their poorer performance present as a negligible quantity and be written off as bad luck because the volume accounted for by company employees is too small to make a dent? If I understand correctly, for a long time, Redditors in WallStreetBets said they were too small to make a dent in stocks, but it was only because of the run-off effect of being a public forum that GME exploded and garnered attention. I figure that a company with employees that can do things quietly and in an unmonitored, unregulated fashion wouldn't run into people noticing it unless they got stupid and grew it out of proportion.
  - Tenoke 4y ago
    Maybe if the information didn't get out but given that a lot of it happens on-chain you get articles like this so more of them start suspecting that's the reason for their poor returns.
PheonixPharts 4y ago
> eventually converged on "smoking causes lung cancer", even though that wasn't agreed upon at the beginning because monied interests disagreed. tangential "Fun fact": The origin of the phrase "correlation does not imply correlation" comes from Ronald Fisher, the father of frequentist statistics, defending tobacco companies. It's unknown by many people but Fisher was an aggressive shill for tobacco in his day and argued that the strong correlation between smoking and lung cancer was not adequate statistical evidence to show any relationship. Fisher, to this day, being one of the most respected minds in statistics held a lot of weight with his opinions and is very likely a major reason why it took decades for legislation to make any progresses in this area. As a stats person it's one reason I really hate that phrase. Of course there are events that have correlation without causation, however the XKCD hidden text [0] is a much more accurate phrasing: > "Correlation doesn't imply causation, but it does waggle its eyebrows suggestively and gesture furtively while mouthing 'look over there'." https://xkcd.com/552/ https://xkcd.com/552/

by usui 4y ago

NelsonMinar 4y ago

That was sort of my reaction to: "why yes, of course this unregulated market has bad actors ripping off other people". But consider the WSJ audience and the way cryptocurrency is increasingly being peddled as a legitimate investment. Insider trading steals money from end retail investors and gives it to powerful insiders. It is actively harmful to ordinary investors. Ultimately markets that tolerate this kind of fraud fail as people get mad about being the sucker who gets ripped off and refuse to participate. Compared to the other kinds of fraud endemic to cryptocurrency, the risk of a corrupt market is a slow burn. Probably the Ponzi scheme will collapse or the rug will be pulled or the contract will be hacked long before the sheep realize they are being fleeced by insiders.

ineedasername 4y ago
That's a good point. Those following from a crypto disaster journalism vantage point will view this story as "yes, and water has been know to be wet on occasion, and the sun to come up on quite possibly every day." But if your exposure is more from following tradition financi news, you may have seen some of the disasters and certainly volatility but otherwise may seem like a gradually emerging but not quite mature new asset class.
Handytinge 4y ago
> But consider the WSJ audience and the way cryptocurrency is increasingly being peddled as a legitimate investment. If this audience doesn't understand what they're investing in and the rules around it, they're not very good investors, are they?

Tenoke 4y ago

>What's the financial incentive for a company to actually enforce "insider trading" rules to its employees? E.g. for Coinbase/Binance the financial incentive is that users might invest less in their offerings if they consistently do worse when participating there compared to initial offerings elsewhere or simply due to seeing proof of it. Similar/related rules might disincentivize insider trading for the projects themselves if insider trading is harmful in the first place which I am not sure of. If it is, and the common arguments that it leads to less outside investments are true then that should at least partially incentivize long-term thinking projects against it. Further, Coinbase/Binance have the incentive to dissuade projects from taking advantage of the information and as far as I know indeed try to though I guess their success is mixed.

usui 4y ago
> E.g. for Coinbase/Binance the financial incentive is that users might invest less in their offerings if they consistently do worse when participating there compared to initial offerings elsewhere or simply due to seeing proof of it. Aside from bad PR spreading like wildfire, won't market participants noticing their poorer performance present as a negligible quantity and be written off as bad luck because the volume accounted for by company employees is too small to make a dent? If I understand correctly, for a long time, Redditors in WallStreetBets said they were too small to make a dent in stocks, but it was only because of the run-off effect of being a public forum that GME exploded and garnered attention. I figure that a company with employees that can do things quietly and in an unmonitored, unregulated fashion wouldn't run into people noticing it unless they got stupid and grew it out of proportion.
- Tenoke 4y ago
  Maybe if the information didn't get out but given that a lot of it happens on-chain you get articles like this so more of them start suspecting that's the reason for their poor returns.

PheonixPharts 4y ago

> eventually converged on "smoking causes lung cancer", even though that wasn't agreed upon at the beginning because monied interests disagreed. tangential "Fun fact": The origin of the phrase "correlation does not imply correlation" comes from Ronald Fisher, the father of frequentist statistics, defending tobacco companies. It's unknown by many people but Fisher was an aggressive shill for tobacco in his day and argued that the strong correlation between smoking and lung cancer was not adequate statistical evidence to show any relationship. Fisher, to this day, being one of the most respected minds in statistics held a lot of weight with his opinions and is very likely a major reason why it took decades for legislation to make any progresses in this area. As a stats person it's one reason I really hate that phrase. Of course there are events that have correlation without causation, however the XKCD hidden text [0] is a much more accurate phrasing: > "Correlation doesn't imply causation, but it does waggle its eyebrows suggestively and gesture furtively while mouthing 'look over there'." https://xkcd.com/552/ https://xkcd.com/552/