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Why should I care? Who is being hurt by this? Im asking as a serious question … who is being hurt by this?

millzlane 4y ago
Would you feel cheated if you sold your options to someone who had insider information and then got rich a week later? Do you think it's unfair that they had knowledge that if you had the same public information would have helped you to make a better informed decision? Would you have faith in a market that was rigged like that?
- pyuser583 4y ago
  I mean there are companies that have software that downloads and analyzes press releases (Fed meeting minutes, corporate reports, etc) and bases trades on them. That’s not something I can do. So the folks who analyze “public” information fast enough effectively turn it into “private information” for the first few milliseconds. The apocryphal story about the Rothschilds building special boats to report the outcome of Waterloo is like that. So it seems that you can have massively asymmetrical information, as long as it’s passed on public info. Which seems like a dumb distinction. In regards to congressmen, they’re often the first people to be exposed to new public information. So the distinction between public and private is less clear for them.
  - Bilal_io 4y ago
    > analyzes press releases Yeah, that's public information. It's fair to everyone. We're specifically talking about "insider" knowledge which they take advantage of before anyone else knows.
  - teo_zero 4y ago
    There are people who can remember the cards already played during a poker game. I cannot. This is massively asymmetrical, but it doesn't allow me to peek at the next card in the deck before bidding.
wanderlust123 4y ago
Firstly, this being allowed creates perverse incentives where policy direction can be dictated by what is profitable for a given politician's portfolio. Policies affect everyone. Second, why the hell should it be legal if the same thing done by a normal citizen results in ultra harsh penalties ( look up laws on Insider Trading).
- pyuser583 4y ago
  It’s not clear to me why insider trading is wrong for anyone. I’m not an expert at securities law, and don’t have a refined opinion. But the distinction between public information and private information can be quite arbitrary. Especially when Congressional leaks are so common. If a congressman takes confidential information, puts it in their blog, then makes trades with it, is that ok? It just seems like the “public information/private information” distinction is less clear, and the harm the law seeks to prevent less defined. And it’s already pretty unclear and undefined, at least to me.
  - zbentley 4y ago
    If widely sanctioned instead of largely banned, insider trading by company leaders and decisionmakers. The leaders would be incentivized to make decisions that preference their own interests rather than the interests of the company as a whole. Putting gypsum in with the flour to report better margins, that sort of thing. I think that that ownership by a diverse group of non-insiders is preferable to consolidating the control over huge individual insider shareholders, for two reasons: - That ordinary citizens can be shareholders of companies, and so won't make decisions against their own interests. - That large groups tend to be more ethically moderated (in the nuclear physics sense: slowed down from snap decisions) and less likely to become cynically corrupt than individuals. Now, big groups still do those things all the time, but the idea is that, for a few reasons (e.g. people don't corrupt at the same rates, so the unless the group shifts all at once they'll identify the people that become corrupt as interlopers and outgroup them), it's still better than taking the chance on an individual.
  - tjr225 4y ago
    Dude you’d have to be at the very minimum obtuse to not see why this is a bad thing. At the maximum, malicious.
zydex 4y ago
In addition to the other comments about the creation of highly perverse incentives, options trading is intriniscally zero-sum. When a politician makes a positive return on selling their contract(s), another person loses and their wealth is transferred to the politician.

Would you feel cheated if you sold your options to someone who had insider information and then got rich a week later? Do you think it's unfair that they had knowledge that if you had the same public information would have helped you to make a better informed decision? Would you have faith in a market that was rigged like that?

pyuser583 4y ago
I mean there are companies that have software that downloads and analyzes press releases (Fed meeting minutes, corporate reports, etc) and bases trades on them. That’s not something I can do. So the folks who analyze “public” information fast enough effectively turn it into “private information” for the first few milliseconds. The apocryphal story about the Rothschilds building special boats to report the outcome of Waterloo is like that. So it seems that you can have massively asymmetrical information, as long as it’s passed on public info. Which seems like a dumb distinction. In regards to congressmen, they’re often the first people to be exposed to new public information. So the distinction between public and private is less clear for them.
- Bilal_io 4y ago
  > analyzes press releases Yeah, that's public information. It's fair to everyone. We're specifically talking about "insider" knowledge which they take advantage of before anyone else knows.
- teo_zero 4y ago
  There are people who can remember the cards already played during a poker game. I cannot. This is massively asymmetrical, but it doesn't allow me to peek at the next card in the deck before bidding.

wanderlust123 4y ago

Firstly, this being allowed creates perverse incentives where policy direction can be dictated by what is profitable for a given politician's portfolio. Policies affect everyone. Second, why the hell should it be legal if the same thing done by a normal citizen results in ultra harsh penalties ( look up laws on Insider Trading).

pyuser583 4y ago
It’s not clear to me why insider trading is wrong for anyone. I’m not an expert at securities law, and don’t have a refined opinion. But the distinction between public information and private information can be quite arbitrary. Especially when Congressional leaks are so common. If a congressman takes confidential information, puts it in their blog, then makes trades with it, is that ok? It just seems like the “public information/private information” distinction is less clear, and the harm the law seeks to prevent less defined. And it’s already pretty unclear and undefined, at least to me.
- zbentley 4y ago
  If widely sanctioned instead of largely banned, insider trading by company leaders and decisionmakers. The leaders would be incentivized to make decisions that preference their own interests rather than the interests of the company as a whole. Putting gypsum in with the flour to report better margins, that sort of thing. I think that that ownership by a diverse group of non-insiders is preferable to consolidating the control over huge individual insider shareholders, for two reasons: - That ordinary citizens can be shareholders of companies, and so won't make decisions against their own interests. - That large groups tend to be more ethically moderated (in the nuclear physics sense: slowed down from snap decisions) and less likely to become cynically corrupt than individuals. Now, big groups still do those things all the time, but the idea is that, for a few reasons (e.g. people don't corrupt at the same rates, so the unless the group shifts all at once they'll identify the people that become corrupt as interlopers and outgroup them), it's still better than taking the chance on an individual.
- tjr225 4y ago
  Dude you’d have to be at the very minimum obtuse to not see why this is a bad thing. At the maximum, malicious.

zydex 4y ago

In addition to the other comments about the creation of highly perverse incentives, options trading is intriniscally zero-sum. When a politician makes a positive return on selling their contract(s), another person loses and their wealth is transferred to the politician.