3 ms·

Is anyone trying to automate the detection of the rampant insider trading that is, no doubt, going on at present?

cmeacham98 2y ago
It's pretty trivial to find insider trading looking activity as a human, so I doubt it would be particularly difficult to write up an algorithm to do it. Of course you wouldn't come close to catching everything but you'd catch blatant stuff. The problem is as a private citizen/company (1) you have no idea who placed the trades and (2) even if you did, you can't enforce the law.
- askonomm 2y ago
  And, as seems to be the case with U.S., even the justice department themselves have little interest in enforcing the law, making insider trading the sort of thing that on paper is illegal, but since everybody does it, it's okay.
FuriouslyAdrift 2y ago
Unusual Whales tracks as much as they can... https://unusualwhales.com/insiders/trades?transaction_codes[]=P&transaction_codes[]=S https://unusualwhales.com/insiders/trades?transaction_codes[...
Galanwe 2y ago
Finding insider trading is not the difficult part, it's being able to prosecute it that is going to be a challenge.
GodelNumbering 2y ago
I have a prototype doing just that! That is on the roadmap :) Although, it is not as exciting as some make it sound. Most insider trading reports are utterly boring. There are a small percentage that are valuable though
am3101 2y ago
By "insider trading" I assume you mean illegal insider trading. There are a few levels: (1) explicitly illegal insider trading where you trade on MNPI and hope no one notices (e.g., CEO sells shares before bad-news results). I don't think you could track this because usually the person trading is either not a prolific insider (a janitor who sees a draft report in the trash can) and therefore how would you track them OR a prolific insider using some sort of shell (e.g., wife/cousin) [or some combo] (2) totally legal and ethical "insider trading." The SEC allows insiders to trade, you just have to do it with proper disclosure and in open periods. As noted Unusual Whales and others track this because in theory this is a signal—if mgmt is selling does that mean they no longer believe long-term in this company (irrespective of near-term MNPI)? The flip side obviously is that management cannot eat shares and sometimes wants liquidity for lifestyle reasons. (3) everything in between—shadow trading, auto selldowns that are turned off if you realize there is good news, etc. Tracking (2) is as mentioned kind of useful for investors but I would argue not a great signal, tracking (1) is mostly useless because it's a post-hoc analysis (most analyses here are—there was a massive spike in trades before/after a big announcement, or more obviously, a big block trade) and tracking (3) is similar to tracking (2). Btw there is also a lot of academic evidence that insider traders of type (1) overestimate the importance and misestimate the impact of their MNPI—knowing J&J had a drug that passed FDA may not matter if (a) there are twenty drugs that failed and (b) the street assumed it would pass. (none of this is legal or trading advice)

It's pretty trivial to find insider trading looking activity as a human, so I doubt it would be particularly difficult to write up an algorithm to do it. Of course you wouldn't come close to catching everything but you'd catch blatant stuff. The problem is as a private citizen/company (1) you have no idea who placed the trades and (2) even if you did, you can't enforce the law.

askonomm 2y ago
And, as seems to be the case with U.S., even the justice department themselves have little interest in enforcing the law, making insider trading the sort of thing that on paper is illegal, but since everybody does it, it's okay.

FuriouslyAdrift 2y ago

Unusual Whales tracks as much as they can... https://unusualwhales.com/insiders/trades?transaction_codes[]=P&transaction_codes[]=S https://unusualwhales.com/insiders/trades?transaction_codes[...

Galanwe 2y ago

Finding insider trading is not the difficult part, it's being able to prosecute it that is going to be a challenge.

GodelNumbering 2y ago

I have a prototype doing just that! That is on the roadmap :) Although, it is not as exciting as some make it sound. Most insider trading reports are utterly boring. There are a small percentage that are valuable though

am3101 2y ago

By "insider trading" I assume you mean illegal insider trading. There are a few levels: (1) explicitly illegal insider trading where you trade on MNPI and hope no one notices (e.g., CEO sells shares before bad-news results). I don't think you could track this because usually the person trading is either not a prolific insider (a janitor who sees a draft report in the trash can) and therefore how would you track them OR a prolific insider using some sort of shell (e.g., wife/cousin) [or some combo] (2) totally legal and ethical "insider trading." The SEC allows insiders to trade, you just have to do it with proper disclosure and in open periods. As noted Unusual Whales and others track this because in theory this is a signal—if mgmt is selling does that mean they no longer believe long-term in this company (irrespective of near-term MNPI)? The flip side obviously is that management cannot eat shares and sometimes wants liquidity for lifestyle reasons. (3) everything in between—shadow trading, auto selldowns that are turned off if you realize there is good news, etc. Tracking (2) is as mentioned kind of useful for investors but I would argue not a great signal, tracking (1) is mostly useless because it's a post-hoc analysis (most analyses here are—there was a massive spike in trades before/after a big announcement, or more obviously, a big block trade) and tracking (3) is similar to tracking (2). Btw there is also a lot of academic evidence that insider traders of type (1) overestimate the importance and misestimate the impact of their MNPI—knowing J&J had a drug that passed FDA may not matter if (a) there are twenty drugs that failed and (b) the street assumed it would pass. (none of this is legal or trading advice)