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Isn't the problem that this allows for all kinds of forms of insider trading? > Insider trading—the practice of buying or selling a company's securities based

by radlad 2y ago

Isn't the problem that this allows for all kinds of forms of insider trading? > Insider trading—the practice of buying or selling a company's securities based on material, nonpublic information—has long been a contentious issue in financial markets. https://www.investopedia.com/terms/i/insidertrading.asp https://www.investopedia.com/terms/i/insidertrading.asp There's also a question of whether they are good for the health of the overall market: https://www.cbsnews.com/news/finances-dark-pools-explained/ https://www.cbsnews.com/news/finances-dark-pools-explained/

JKCalhoun 2y ago
It stands to reason that if the buyer/seller are seeking private rooms there is something unfavorable for them about "lit" trading. That alone should raise red flags.
- roenxi 2y ago
  That raises red flags that the standard market regulations are bad - they are signalling that they believe an exchange with different rules is better for both traders. That would be bad for all the traders stuck on the exchange with inferior rules, but the solution is to reform the standard exchange. Probably trying to get away from HFT if I were going to guess blindly.
ajross 2y ago
It's by definition insider trading. If they made the trades in public the market price would change to reflect the demand. They don't want that to happen, they want the trade to happen at a non-market price set by people with information about the deal.
- ikmckenz 2y ago
  No, "I am XYZ hedge fund and I want to buy stock ABC" is not material non-public information to XYZ hedge fund. If it was, any buying or selling of stocks would always be illegal, since you would be "insider trading" on your desire to buy the stock.
  - deleted 2y ago
    [deleted]
- gruez 2y ago
  The "insider" in "insider trading" refers to trading on privileged nonpublic information, not arranging the trades in a private venue.
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    [deleted]
- oangemangut 2y ago
  Even in dark pools the trades have to happen within the NBBO, they can't just trade at whatever price they want.
ikmckenz 2y ago
> Isn't the problem that this allows for all kinds of forms of insider trading? No, it doesn't. All trades are made public after they happen, as per regulations. There is no difference to insider trading regulations if a bad actor trades via a lit exchange or via a dark pool. Dark pools only "hide" pre-trade information, such as standing buy or sell limit orders.
- JKCalhoun 2y ago
  Really? Isn't knowing that an extremely large trade is about to take place insider information?
  - tedunangst 2y ago
    That is only insider information for the person making the trade.
    - deleted 2y ago
      [deleted]
    - JKCalhoun 2y ago
      And there are no other parties involved before the trade? That was not my understanding.
      - tedunangst 2y ago
        You may be thinking of front running, which is an agency problem, and also not this.

by radlad 2y ago

JKCalhoun 2y ago

It stands to reason that if the buyer/seller are seeking private rooms there is something unfavorable for them about "lit" trading. That alone should raise red flags.

roenxi 2y ago
That raises red flags that the standard market regulations are bad - they are signalling that they believe an exchange with different rules is better for both traders. That would be bad for all the traders stuck on the exchange with inferior rules, but the solution is to reform the standard exchange. Probably trying to get away from HFT if I were going to guess blindly.

ajross 2y ago

It's by definition insider trading. If they made the trades in public the market price would change to reflect the demand. They don't want that to happen, they want the trade to happen at a non-market price set by people with information about the deal.

ikmckenz 2y ago
No, "I am XYZ hedge fund and I want to buy stock ABC" is not material non-public information to XYZ hedge fund. If it was, any buying or selling of stocks would always be illegal, since you would be "insider trading" on your desire to buy the stock.
- deleted 2y ago
  [deleted]
gruez 2y ago
The "insider" in "insider trading" refers to trading on privileged nonpublic information, not arranging the trades in a private venue.
- deleted 2y ago
  [deleted]
oangemangut 2y ago
Even in dark pools the trades have to happen within the NBBO, they can't just trade at whatever price they want.

ikmckenz 2y ago

> Isn't the problem that this allows for all kinds of forms of insider trading? No, it doesn't. All trades are made public after they happen, as per regulations. There is no difference to insider trading regulations if a bad actor trades via a lit exchange or via a dark pool. Dark pools only "hide" pre-trade information, such as standing buy or sell limit orders.

JKCalhoun 2y ago
Really? Isn't knowing that an extremely large trade is about to take place insider information?
- tedunangst 2y ago
  That is only insider information for the person making the trade.
  - deleted 2y ago
    [deleted]
  - JKCalhoun 2y ago
    And there are no other parties involved before the trade? That was not my understanding.
    - tedunangst 2y ago
      You may be thinking of front running, which is an agency problem, and also not this.