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There's nothing evil in inside trading. It's a shame that it's against the rules in most markets. It only benefits some parties that aren't really invested into
by henvic 3y ago
There's nothing evil in inside trading. It's a shame that it's against the rules in most markets. It only benefits some parties that aren't really invested into the company.
- bigbillheck 3y ago> It only benefits some parties that aren't really invested into the company. Whoever's on the other side of the trade is by definition invested into the company, either before the sale, after the sale, or both.
- aqme28 3y agoThat is not true. An executive that is allowed to insider trade can make a lot more money mismanaging the company in volatile ways.
- koolba 3y agoDeliberately mismanaging a company would be a violation of the executive’s fiduciary responsibility.
- aqme28 3y agoWell then good thing it was only "accidental." This also ignores the large number of people with insider information who are not execs at the company. Clients, partnering firms, etc. If it's all about fiduciary duty, then the law firm doing a large M+A deal should mismanage that deal, so they can trade on it for their own profit.
- happymellon 3y agoAnd then would be fired. Getting their golden parachute and insider trading bonus.
- bigbillheck 3y agoGood luck proving it.
- acdha 3y agoThe problem is that you’re moving from a simple easily-proven fact to something which requires two judgement calls. Any prosecutor can show that you made a trade before certain information became public, but proving that something was mismanagement (as opposed to a mistake or bad luck) or that it was a deliberate attempt to play share price games is so much harder that most executives would evade punishment even if pretty much everyone would find their actions hard to explain otherwise. White collar crimes are already enforced laxly due to the challenge of needing to prove intent in many cases, there’s no benefit to making it even easier to defraud investors.
- EchoChamberMan 3y agoOnly problem is humans constantly fail to take, or purposefully avoid, responsibility.
- chrisfowles 3y agoI might agree with buying, it's pretty damaging with selling though.
- mcmoor 3y agoI've been thinking about it sometimes and this seems correct. Abolish this law and delay every single selling. Of course I haven't think this through and this may end catastrophically but I'd like to see a simulation.
- NeoTar 3y agoCan you elaborate? It feels pretty damned unfair to me!
- ninetyninenine 3y agoInsider trading is theft. You know the stock will go up, the other party unfairly doesn't. The other party would not have sold if he had known, so you have cheated the other party. Same if you know the stock will go down. The other party would not buy if he had known the thing you unfairly do. This is also cheating someone. Buying a rivals stock depends on the reason why, but it would be against company interest. The SEC doesn't need to enforce this, the board should fire him for it.
- blagie 3y agoPublic markets are intentionally set up to "benefits some parties that aren't really invested into the company" -- e.g. your retirement savings and your grandma's. That's a feature. Not a bug. Indeed, the main point of regulated public markets (as opposed to private ones) is to insulate your grandma's retirement funds from shenanigans like this, because before that, people would lose life savings to scammers. If you want to allow shenanigans and / or only people with a vested interest, stay private and buy / sell only to savvy investors. That's allowed too. Insider trading means insiders can and will: 1) Buy stock and launch (dishonest) positive press releases 2) Sell stock thereafter and launch (dishonest) negative press releases Loop, rinse, and repeat. That happened, and if permitted, that would happen again. Much worse things happened too. Your grandma can't do due diligence on every stock in her index fund. A savvy investor making targeted investments can.
- Miner49er 3y agoI guess morals are subjective, but I think insider trading is definitely immoral. It's theft.
- dktp 3y agoInsider trading being illegal encourages participation in markets for people outside the company. As well as discourages intentionally messing up within the company and profiting from short selling The argument against it is that markets would be more efficient if people were allowed to trade on information not yet available to the public Seems like a worthy tradeoff to me
- phpisthebest 3y ago>>As well as discourages intentionally messing up within the company and profiting from short selling While I do not agree with the OP on insider trading being good.... I also think short selling is a net negative and should be banned right along side insider trading
- scrlk 3y ago> I also think short selling is a net negative and should be banned Why? The potential losses for shorting are infinite whereas the profit is capped, so entering a short requires high conviction. Stock markets are also a market for information: banning short selling takes away a large amount of information and has negative impacts on price discovery, liquidity etc.
- Nursie 3y agoWhy? If you think a stock is underpriced, you can buy it and bet your knowledge is superior to the general market’s. Shorting is just the logical reverse, and aids price discovery in the opposite direction.
- auc 3y ago> I also think short selling is a net negative and should be banned right along side insider trading How would you incentivize people to find fraudulent companies like Enron?
- graemep 3y ago> The argument against it is that markets would be more efficient if people were allowed to trade on information not yet available to the public If that is true, then markets would be even more efficient is such information was made public immediately.
- eemil 3y agoIt's not a question of morals, but a fundamental requirement for the publicly traded stock market to function. If insider trading is allowed, the market will turn into a game called 'who has the best insider information'. No one will buy or sell stocks based on public information alone, because they will always be at a disadvantage.
- deleted 3y ago[deleted]
- zarathustreal 3y agoIf you’re buying stocks based on public information alone, in this age of web scraping and algorithmic trading, you’re already always at a disadvantage.
- prepend 3y agoThe idea is to minimize disadvantages, not eliminate.
- Jenk 3y agoWeb scraping and "algorithmic trading" both depend upon publically available information
- bigbillheck 3y agoI'd be OK with banning automatic trading.
- bluGill 3y agoThat is all public information. I'm not convinced it is valuable information, but it is pudlic and you should cunsider how pou use it
- prepend 3y agoIt harms the other side of the trade that doesn’t have the information.