I would have to disagree with this. Insider trading is bad for the stockholders of the company who don't have the inside info. Let's say a company has a true value of 100 million dollars and there are 100 stockholders who each own the same amount of shares. This means each stockholders stock is worth about 1 million dollars. Let's say 10 of the stockholders have inside info that the company is going to obtain a huge contract in a month that will increase the value of the company to 200 million dollars. Because of this info they offer to buy the remaining stock from the 90 other shareholders for 1,200,000. 50 of the stockholders think this is a great offer with a chance to make about 200,000 so they sell their stock. Now the 10 with the inside info own 60% of the company that will double in value shortly. The 50 stockholders who didn't have the inside only make 200,000 whereas if they would have just kept the stock for another month their stock would have been worth 2 million and they would have made 1 million profit. The 50 who sold definitely lose out on a huge score, and those 10 with the inside info make a huge profit because of that inside info.

First, the company is free to prohibit insiders from trading the stock, and sue them if they violate their agreement. We don't need the incompetent SEC making up laws out of thin air and misusing government resources to prosecute them.

Second, any public company trades thousands if not millions of shares a day. So in your example some shareholders would be selling out at the $100M valuation if not for insider trading getting them 20% more.

Ive said all you need to do is require insiders make a public filing before transactions, most outsiders might not sell to them at $1.2M when they know the CEO and top insiders are making offers to buy everyone out.

Yea, this.

Don't forget the freed up side on the corporation as well, billions of dollars wasted each year trying to comply with the SEC's ever growing basket of insanity.

Can't tell who's leveling ITT anymore. The idea that insider trading isn't bad for the public markets and/or shouldn't be prohibited by law is, on its face, categorically absurd.

Used to be a pretty big news junkie before discovering poker - still am a little bit, although it's kind of hard to tell when the only clips i ever mention are from PokerScout and US Magazine lol ...



It's mostly the public policy stuff that I follow - guess with fresh ideas, there's always a promise of progress?


Anyways, guess is that kind of the main economic idea of the 'Establishment' wing of the Conservative base, that the economy's too heavily regulated, and deregulation will help corporations perform better?

Although it seems like a lot of the right has embraced the idea that bad free trade deals are to blame for the stagnating economy, because so many well-paying middle class manufacturing jobs got shipped overseas. Guess analysts think support for this idea might have been part of the reason Trump wound up winning the nomination?

Please explain how less efficient pricing is good for either the public or the markets?

Cause many economists disagree with you.

This

There is a difference between the relevant information being immediately released into the market and some scumbag making $$$$$$ for releasing the information in the form of buying or selling shares at the wrong price and causing price movements.

Again, that "wrong price" is closer to the fair price than it would be without insider trading. So people who don't have insider info lose more money if the insider doesn't trade.

and what if they were shorting the stock??

Works same both ways.

If all the companies stock prices were perfectly valued there would be no famous Warren Buffets or chances to make big money. The big money is made in the market when you are smart enough to see when a stock is over or undervalued.

Sort of like sporting events. If all sporting events were perfectly handicapped the only people who would make money in the long run would be the sports books, the bookies, and those bettors who won over time by pure luck

With all of this discussion about SEC regulations and US vs Chiarella or US vs anyone, it might be helpful to remember that Baazov has been charged in Canada, which is a sovereign nation possessed of it's own legal code, and not subject to US law.....

So insider trading should be banned to make Warren Buffett higher returns?

You realize if insider trading were legal it would mean higher returns for index funds and the average joe?

pretty sure Canada is a US territory that hasn't applied for statehood yet.

A level investment playing field is essential to maintain trust in the markets. Millions of us would be less favorably inclined to invest in stocks if the ones we owned or considered owning were being traded by those with insider information. The disadvantage in making buying and selling decisions when insiders are trading in the same markets is obvious.

Pretty sure we're a separate country, that burned the White House to the ground the last time you messed with us. en.wikipedia.org/wiki/War_of_1812 -- Oh and the part where it says "disputed victory," I guess that's what Americans call it when you invade somebody, get your a** handed to you, and get chased all the way home.

Insider trading doesn't make the market more efficient by bringing the price closer to the true valuation. It's the release of information that brings the price into line.

Insider traders simply profit by having that information before the general public has that information and can make better decisions about the stocks true value when the information goes public. Some people who track insider trades can take a guess why an insider might be doing something. Ultimately the stock makes it's big move once the information is released.

Economists debate whether it's good or bad. You all aren't going to come with a definitive answer here by arguing about it.

Can those of you that want to debate that tangent please take it to another thread so that those of us that want to see if any news related to Baazov comes up don't have to parse through all this?

WRONG! Read the post that asked me specifically for cases and other information to support my thesis. A thesis that was debated for 15-20 posts before I ever posted.

I did not derail the thread. This was the topic of discussion for the last several pages of this thread. Then ESW disputed some basic tenets of common law and then I was asked by another member for specific cases and other info.

So please apologize for derailing the thread by misstating the facts.

The investment field is NOT level though. Professional investors have far better information about corporate performance that is not available to the average investor. Hedge Funds actually pay middle level corporate managers "consulting fees" to get info about a company's earning outlook or product development. An entire industry operates around this process.

Investment banks have access to inside corporate data when they advise on mergers or stock offerings etc. They also have access to "order flow". They see what hedge funds and even retail investors are doing and can legally front run those orders. (That is not an exaggeration)

In addition, now that markets are primarily electronic, large firms pay a fee to the exchanges so that their computers are closer to the exchange's servers and therefore there electronic orders reach the exchange miliseconds ahead of other orders. On top of that, brokers can "sell order flow" which means outside firms pay the brokers to see customer orders before the market sees them and before they are executed enabling those firms to trade of ahead of those orders.

Thus, inside trading in the broadest sense doesn't really hurt investors any more than the other information asymmetries in the market. In the pure case of corporate insiders, the company is certainly hurt and the corporate officer certainly violates his fiduciary duty to put the company's interests first. That is illegal on several fronts.

But attempting to prosecute people who have no connection to a company but somehow obtain non public info(i.e overhear a CEO on an airplane) legally, is absurd. The courts have finally restrained the SEC and anchored US insider trading law to the intentional violation of a fiduciary duty somewhere in the chain of information transfer.

The real problem is not insiders trading for their own gain, but institutions that under the law are given special advantages over the average investor. Electronic exchanges have made the securities markets less transparent and less fair in the sense of access and information dissemination. Now those participants with the fastest computers and best connection to the exchange's servers and with the most money to buy order flow, or information about customer orders before they hit the market, are all examples of the systemic unfairness of the modern securities markets.

conlaw's like the player who tries to win every pot, no matter how weak the hand, by amping up the aggro ... pot, pot, pot ...

Except here it's post, post, post - with substance that's the equivalent of J2o

Hopefully the mods'll move the side discussion to OT or finance.

http://qz.com/709271/iex-sec-approval-stock-exchange/

This is used to fight the speed issues. 38 miles of cable.

"a coil of fiber-optic cable 38 miles long that slows quotes and trades by 350 millionths of a second. This bit of hardware is aimed at keeping high-frequency traders from racing ahead of ordinary investors and taking advantage of that speed to profit before others can react."

The stock market is the biggest game of poker in the world. However, this sort of trading is speculation, not investing.

You should read Flash Boys by Michael Lewis if you're interested in this kind of stuff (if you haven't already). It's about IEX and its founders as well as the high-frequency trading firms.

(sorry for the derail, I just can't recommend that book enough)

But if the insider released the info to the market, rather than stealing money from share buyers/sellers, the price would be fair.

Yeah, just in the other direction

http://www.fool.ca/2016/06/15/amaya-...-of-euro-2016/