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Say you are an executive of a company and learn of certain piece of inside information which will affect the stock price. Say, for example your company just got
by hristov 13y ago
Say you are an executive of a company and learn of certain piece of inside information which will affect the stock price. Say, for example your company just got a new order that will double their profits. If insider trading were permitted you would try to keep this piece of info secret for as long as possible to give you time to buy as many shares as you can. After you buy all you can you will probably want tip off your friends and family to buy all they can. All this takes time, so you would want to keep this secret for as long as possible.
If insider trading is illegal you will want to announce this news as quickly as you can so that your company is viewed as being transparent and shareholder friendly.
- jessaustin 13y agoSay, for example your company just got a new order that will double their profits. This sort of info is already kept secret for as long as possible, for both contractual and commercial reasons. At least if the officers are trading on it the info is leaking out in some way. So, for this specific example, allowing insider trading will decrease volatility. (I'm not convinced that's so valuable, but it's the sort of thing many people care about.) I can't think of any company that acts as if they care to be "viewed as being transparent and shareholder friendly", so apparently that isn't so important.