People would just look at how the prices move on the 'free for all' market and then trade the real stock market using that information, thus insider trading on

People would just look at how the prices move on the 'free for all' market and then trade the real stock market using that information, thus insider trading on the real stock market would ensue. You can't have it both ways, you either allow people to trade on private information (thus indirectly making the information public by moving the stock price) or you don't.