9 ms·

I don't really understand why insider trading is illegal in the first place (it makes the market more efficient, and no one is defrauded) but it does seem weird

by isamuel 15y ago

I don't really understand why insider trading is illegal in the first place (it makes the market more efficient, and no one is defrauded) but it does seem weird to make it legal only for a certain class of favored people. The right answer, though, is to just legalize it.

stretchwithme 15y ago
Its only illegal for people that don't know how to wink.
Dove 15y ago
It's insider trading because the information that motivates it isn't public. It's like selling someone a work animal that you (but not they) know has a fatal disease. It's not literally fraud, but it smells the same. I think of the market as a medium for transmitting and storing information about how much people value things. It has incredible bandwidth and storage capacity, but its latency is not always the best. Anyone proposing a replacement for a market (in anything!) needs to have respect for the incredible volume of information they're seeking to replace, but the market is not the best tool for everything. I think this is one of those degenerate cases where the latency kills you. Specifically, the time it takes to go from "some people know this company is in trouble" to "everyone knows it" is way too long when the market is the medium of transmission. Lots of people can be ruined in the mean time.
jarek 15y ago
I'm sure all publicly listed companies will be thrilled to see material secret information central to their business openly traded to highest bidder under your scenario. Who wouldn't want to know exactly how many CPUs Intel sold yesterday and intends to sell tomorrow? edit 1 hr later: Now, a dilemma: do I blame the Apple fanboys or the Android fanboys for these downvotes? HN hive mind, please advise.
brown9-2 15y ago
The person on the other side of the trade is defrauded.

9 ms·

I don't really understand why insider trading is illegal in the first place (it makes the market more efficient, and no one is defrauded) but it does seem weird

by isamuel 15y ago

stretchwithme 15y ago
Its only illegal for people that don't know how to wink.
Dove 15y ago
It's insider trading because the information that motivates it isn't public. It's like selling someone a work animal that you (but not they) know has a fatal disease. It's not literally fraud, but it smells the same. I think of the market as a medium for transmitting and storing information about how much people value things. It has incredible bandwidth and storage capacity, but its latency is not always the best. Anyone proposing a replacement for a market (in anything!) needs to have respect for the incredible volume of information they're seeking to replace, but the market is not the best tool for everything. I think this is one of those degenerate cases where the latency kills you. Specifically, the time it takes to go from "some people know this company is in trouble" to "everyone knows it" is way too long when the market is the medium of transmission. Lots of people can be ruined in the mean time.
jarek 15y ago
I'm sure all publicly listed companies will be thrilled to see material secret information central to their business openly traded to highest bidder under your scenario. Who wouldn't want to know exactly how many CPUs Intel sold yesterday and intends to sell tomorrow? edit 1 hr later: Now, a dilemma: do I blame the Apple fanboys or the Android fanboys for these downvotes? HN hive mind, please advise.
brown9-2 15y ago
The person on the other side of the trade is defrauded.