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There's always the devil's advocate case that insider trading is good because it makes for more accurate price discovery (as in executives have access to non pu

There's always the devil's advocate case that insider trading is good because it makes for more accurate price discovery (as in executives have access to non public information, so e.g. if the company has had a great quarter and the executives buy shares before the earnings figures are released then the price goes up and the market price more accurately reflects the value of the shares). Of course this case is total nonsense but it is fun to make at parties (if you're weird like me) or something. In reality the market being fair is super important for it to function because people won't invest if they're continually being fleeced by people using inside information.

kasey_junk 3y ago
In the US insider trading laws are not based on fairness. They are based on theft, insiders using material non-public information are stealing from other shareholders. There is no expectation of fairness in US public markets.
- sealeck 3y ago
  Theft is unfair? I mean fairness in "no market participants have access to information that is not public". Using a satellite to work out the usage rates of a real estate company's car parking centres? Fine. Bribing an executive to give you non public information? Unfair.
- NoboruWataya 3y ago
  Insider trading is not unlawful because it is theft. It is considered theft because it is unlawful. Trading with someone when you have knowledge they don't is not "theft" in the general sense of the word. If it was, there wouldn't need to be insider trading laws, because theft is already a crime. The only thing you have really taken from your trading counterparty is the expectation of additional profit (or reduced loss) had both parties traded only on public information. That is an expectation that is created by insider trading laws. "Fairness" is a vague term. There is an expectation of fairness in US public markets in the limited sense that it is expected that traders generally have access to the same material information about the underlying security.
  - tw04 3y ago
    > Trading with someone when you have knowledge they don't is not "theft" in the general sense of the word. It’s not theft, it’s fraud which is also illegal. If I sell you a gold necklace I know is fake and worthless, that’s fraud. If I run an antique appraisal business and you bring me an antique to value for you, I know it’s priceless but tell you it’s a knockoff and buy it from you for pennies on the dollar, that’s fraud.
    - lsaferite 3y ago
      Your examples are not what the PP was talking about. If I know some information you do not and I make a trade with you based on that information to my gain, that is not fraud. There are rules that could put me in the "insider trading" target, but there are plenty of situations that don't. I might have done better market research than you did and know that some commodity is about to jump in value or some company is about to become more valuable due to some other activity in the world. Me trading on that information is not fraud, it's smart investing. You examples are fraud and maybe (?) fraud. I'm not a lawyer so I couldn't say if lying to someone selling you something about it's value is fraud or not. Morally it's wrong, sure. Legally, I have no idea. Both of your examples are, IMO, bad.
      - tw04 3y ago
        >If I know some information you do not and I make a trade with you based on that information to my gain, that is not fraud. It quite literally is fraud, whether you want it to be or not. If you KNOW a stock is worth more or less based on information that you currently have but are withholding from me in a trade, that's fundamentally fraud. If you know a stock is worth more or less based on publicly available information that I'm just too lazy to look up, it isn't. I find it fascinating the gyrations folks in the financial sector go through to commit what are otherwise cut and dried illegal activities but pretend it's ok "because finance is complicated" or unique or some other such nonsense.
        AdhemarVandamme 3y ago

kasey_junk 3y ago

In the US insider trading laws are not based on fairness. They are based on theft, insiders using material non-public information are stealing from other shareholders. There is no expectation of fairness in US public markets.

sealeck 3y ago
Theft is unfair? I mean fairness in "no market participants have access to information that is not public". Using a satellite to work out the usage rates of a real estate company's car parking centres? Fine. Bribing an executive to give you non public information? Unfair.
NoboruWataya 3y ago
Insider trading is not unlawful because it is theft. It is considered theft because it is unlawful. Trading with someone when you have knowledge they don't is not "theft" in the general sense of the word. If it was, there wouldn't need to be insider trading laws, because theft is already a crime. The only thing you have really taken from your trading counterparty is the expectation of additional profit (or reduced loss) had both parties traded only on public information. That is an expectation that is created by insider trading laws. "Fairness" is a vague term. There is an expectation of fairness in US public markets in the limited sense that it is expected that traders generally have access to the same material information about the underlying security.
- tw04 3y ago
  > Trading with someone when you have knowledge they don't is not "theft" in the general sense of the word. It’s not theft, it’s fraud which is also illegal. If I sell you a gold necklace I know is fake and worthless, that’s fraud. If I run an antique appraisal business and you bring me an antique to value for you, I know it’s priceless but tell you it’s a knockoff and buy it from you for pennies on the dollar, that’s fraud.
  - lsaferite 3y ago
    Your examples are not what the PP was talking about. If I know some information you do not and I make a trade with you based on that information to my gain, that is not fraud. There are rules that could put me in the "insider trading" target, but there are plenty of situations that don't. I might have done better market research than you did and know that some commodity is about to jump in value or some company is about to become more valuable due to some other activity in the world. Me trading on that information is not fraud, it's smart investing. You examples are fraud and maybe (?) fraud. I'm not a lawyer so I couldn't say if lying to someone selling you something about it's value is fraud or not. Morally it's wrong, sure. Legally, I have no idea. Both of your examples are, IMO, bad.
    - tw04 3y ago
      >If I know some information you do not and I make a trade with you based on that information to my gain, that is not fraud. It quite literally is fraud, whether you want it to be or not. If you KNOW a stock is worth more or less based on information that you currently have but are withholding from me in a trade, that's fundamentally fraud. If you know a stock is worth more or less based on publicly available information that I'm just too lazy to look up, it isn't. I find it fascinating the gyrations folks in the financial sector go through to commit what are otherwise cut and dried illegal activities but pretend it's ok "because finance is complicated" or unique or some other such nonsense.
      - AdhemarVandamme 3y ago