Comments on: How and whether to fight insider trading A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: nzl-kz7 Sat, 08 Jun 2013 14:54:35 +0000 The sec is hunting tall poppies(Martha Stewart, Steve Cohen) because it looks good and plays well for obama.

As you have written they could do a lot for the American economy by cracking down on extortion otherwise known as patent trolling.

This would be efficient use of taxpayer funds so will never happen in America.

By: jvm Thu, 06 Jun 2013 04:34:52 +0000 People posting about the evils of insider trading I think are not considering the outcome: stock prices move closer to their fair price more quickly. That’s really only a good and more fair thing.

Sure, during that time, insiders are making money off their trades. But since the price is wrong, half of all market participants are losing unfairly! Anyone buying a stock that is about to bomb is a sucker about to lose a lot of money, whether they buy it from an insider trader or another sucker. And the insiders don’t force anyone to trade; anyone trading with them is doing it of their own free will.

The contribution of the insider trading is that insider shorting will cause the price to drop in advance of the public announcement, meaning that the suckers who are buying before then will pay a little less and ultimately lose a little less than they would have otherwise.

By: Christofurio Tue, 04 Jun 2013 20:18:51 +0000 Dr9 “If prosecuting insider trading is profitable, we should just increase the SEC budget. There’s a capitalist idea.”

Sorry, but that makes no sense. If prosecuting insider trading is profitable, why does it even need a “budget” funded by taxation or borrowing from the Chinese?

Spin off the function of prosecuting insider trading into a quasi-public agency, sort of like the USPS, which supports itself through selling stamps. Let the new prosecutorial body support itself with its “profitable” activity. Reduce the budget of the SEC — the agency that continues to do everything ELSE the SEC has been doing — accordingly.

By: Auros Tue, 04 Jun 2013 17:58:54 +0000 “insider trading is a pretty victimless crime”

That doesn’t make any sense. If an insider has knowledge of an adverse shock to the company, and passes his stock at it’s still-high price to a sucker, that sucker is going to take real losses. Meanwhile, if an insider has knowledge of positive information, and buys up stock at a low price, he’s denying the sellers an opportunity to profit; probably less-bad than the other case, but still definitely not “victimless”.

By: dkato Tue, 04 Jun 2013 17:18:13 +0000 two points: 1) Here is an easy and effective way to stop most insider trading: 15 days before the end of a company’s fiscal quarter, continuing until the day after the company reports their financial quarterly results (approximately 30-45 days in total) tax any profitable trade, one opened and closed in that window of right before the quarter closes and until the company reports, at 100%. That would virtually eliminate 90% of insider trading. It would also eliminate day trading at the end of a quarter, but a small price to pay in my opinion. If you wanted to eliminate 100% just extend the time period another 30 days. 2) The author’s comment that we are spending to much money I do not believe is accurate, in the sense that I have read elsewhere that the fines and penalties that the SEC and the SDNY have collected from insider trading convictions have far exceeded the cost in manpower. That was before the $600 million the SEC received from SAC recently. It seems like a profit center to me.

By: KingBurough Tue, 04 Jun 2013 16:45:55 +0000 As in many aspects of financial markets, there is ample opportunity in HFT and inside trading to exploit and damage modern marketplaces (and wallets). Information asymmetry in insider trading makes it profitable for insiders to profit from exclusive knowledge. There would definitely be a “market” for insider information, with the rewards going to the highest bidder. As long as such as situation were in existence, money would flood to the most exploitive asset manager, to the detriment of other actors in the market. Of course that information does belong to the shareholders, who, by not having it, might exit or enter a position at the wrong time and price. So there is a potential detrimental opportunity cost.

And of course HFT provides incentive to flood the media with “little rumors” in the market, exploiting multiple price changes that happen in the blink of an eye. Having an advantage of just a penny, or even a fraction thereof, per share would provide opportunity to reap untold millions (as has always been the case, but with HFT even more so).

The illegality of the drug trade in effect provides incentive to profit, but that doesn’t make the marketing of these products any less dangerous or immoral. While insider trading might not rise to that level, it is nonetheless not victimless.

By: dWj Tue, 04 Jun 2013 14:09:29 +0000 A company in the midst of a buy-back program should be allowed to time its purchases on the basis of inside information. If “the information is going to come out anyway, the company should try to” recoup some of that value for the long-term shareholders (and other stakeholders) somehow.

By: Th.M Tue, 04 Jun 2013 13:59:39 +0000 “If you’re a buy-and-hold investor, you won’t be hurt by insider trading; if anything, the broad knowledge of its existence will just make stocks that much cheaper for you to buy.”

I’m pretty sure you are familiar with the concept of adverse selection costs.

By: dangercatz Tue, 04 Jun 2013 13:52:22 +0000 On the last point about the SEC’s use of resources – with recent reductions in funding levels to the SEC (which I understand to be a House Republican strategy to undermine Dodd-Frank and “government regulation” in general), large insider trading settlements could actually be a net gain to the resources of the SEC. I haven’t looked at any numbers comparing cost of prosecution to settlements received, but in a world of $600mm insider trading settlements, it’s plausible.

By: insidertrading Tue, 04 Jun 2013 13:43:57 +0000 As someone who has actually been convicted of insider trading (in Canada and the US) for engaging in the practice in over 100 deals spanning near 15 years, I can tell you that it is not, in my opinion, anymore common than it was in the past.

While I now know what I could have done differently to avoid getting caught let alone convicted (while still “benefiting” from the activity as long as I wanted), most engaged in the practice do not and, as a result, are being identified by advances in technology.

From my experience, “one off” inside traders try to take advantage of their informational edge by purchasing options (and that is what regulators are finally focusing upon). Inside traders, like myself, that had access to a steady stream of reliable information purchase stock and usually spread out over time and in between camouflage trades. Hedge funds were the best suited for such activity (as I told regulators) when I engaged in it and they still are. The only difference is that they are finally being identified.

When you can literally “print” or pass along money (or success in an industry) by utilizing information while rationalizing it as a victimless crime, it is a very difficult temptation to resist (and one that you would be very surprised to learn is given into quite frequently by those you — but not me — would least suspect).

S.J. Grmovsek