What's so bad about insider trading

[LAM]

Insider trading sounds perfectly logical.

And it seems like everyone does it.

And the government can't do nuffin about it usually.

And no-one complains about the morality of insider trading.

And when the hell was capitalism even trying to be fair?

Also just as a note: I despise it when people say something is bad because its illegal; its just so ignorant and idiotic to say.

(I am talking about insider trading done by stock market traders.)

 

[Claverhouse]

Re: Whats so bad about insider trading

I've never understood why this is considered wrong, not only is it logical, but until a decade or so back it wasn't even illegal in many ( non-Anglo ) jurisdictions, such as Germany. To act upon knowledge is one of the very least raw acts decadent capitalism makes capable --- Consider hounding a company with frivolous lawsuits until they go bankrupt from the cost and their assets are auctioned to one's associates. ( In this case, not associates one knows from the synagogue, but a synagogue itself... )


Insider trading also offers equal risk to profit ( if one, say, gives out a dud tip ) so it's not the same as surefire stealing as when one's accountants cook the books to cover up defaulcations.




Claverhouse

 

[LAM]

Re: Whats so bad about insider trading

other forum's responses to this:

"It's bad because it can cause people with interest in publicly traded companies to maneuver and manipulate their business in a way that is beneficial to them personally, regardless of the impact on the overall shareholders. I would have thought that this would be pretty obvious. You may also be shocked to find out that selling people toxic waste and marketing it as soda pop is also not allowed, even under our capitalist system."

"Information and expectations are basically what the stock market lives on - if you get information well ahead of everyone else you can carefully select shares to purchase or sell, depending on what announcement might be made, and essentially get something for nothing.

In such a way you would be manipulating stock prices."

"Its immoral becuase they are using an unfair advantage to make a profit at the cost of other peoples profit.

Exactly that's why **** should care. Think about what the world runs on. Its all about money and money is peoples livelihoods. If the market tanks because of inside trading and it would if inside trading it weren't illegal there would be real human suffering associated with it."

And those were the best they had to offer me. Quite frankly, these appeals on how insider trading wreaks apocalyptic destruction on the stock market underwhelm me. The first post did have somewhat of a point. Although stock traders have nothing to do with running companies and the instances of what he described happening seem very rare instances of taking things too far.

 

[ProxyAmenRa]

Re: Whats so bad about insider trading

Market does not work efficiently if all consumers do not have full information about the commodities that they are buying. Insider trading works off the fact that a minority of consumers have full information and the rest do not. Hence, the market is not working efficiently. Commodities are not priced according to their value. Players engaging in transactions are detrimentally effected because they are trading more value for less value. Essentially it is stealing.

 

[bananaphallus]

Re: Whats so bad about insider trading

If equally well-informed stockholders/potential buyers is an unreachable goal (which is not necessarily a fault of the business), then what's an acceptable of degree of disparity in the stockholders' respective conception of an organization's financial standing?

 

[LAM]

Re: Whats so bad about insider trading

Pro:
http://arbyte.us/essays/Defense_of_Insider_Trading.html

Anti:
http://law.freeadvice.com/financial_law/securities_law/insider_trading_illegal.htm

 

[ProxyAmenRa]

*cough* enron

 

[walfin]

Although stock traders have nothing to do with running companies

Is insider trading not getting information from people who run the companies? They are manipulating the stock price for their own benefit without consideration for the other shareholders.

Though the best weapon against insider trading, which arises from information asymmetry, is not criminalising it but making the market as strong form as possible.

 

[BigApplePi]

Off the cuff comments:

1. Trading in a public market should be fair to the public. This means equal access to information. The trader does his or her own "due dilligence" and gets rewarded for that.

2. They pass laws to promote #1, else insiders would trade.

3. I would love to have legal advance market information on publicly traded companies? Why? I could probably turn $10,000 into $1 billion in a short while trading options. (That's "b" for billion.)

4. Limited insider trading is unavoidable and easy. It is most certainly illegal but easy to get away with and very hard to prove. Want to know how? Ask me.

5. Insider trading is always limited fortunately. No one can know fully world markets, local markets and particular trading vehicles.

 

[ProxyAmenRa]

I am surprised governments are allowing mark to market accounting; it is a form of insider trading.

 

[Inappropriate Behavior]

Do you put all your money down on the poker table when you only get to see your cards but your opponents get to see each other's cards as well as their own?

Serious question if you are serious with your OP question.

How about if you had to play stud while your opponents got to play draw?

Most money in the markets are people's retirement funds, pensions etc. For people to continually keep investing they have to at least believe that they are facing a fair risk and not an unfair one. Otherwise they might just do the sensible thing and keep their money in a mason jar buried out behind the garage. Of course that would defeat the whole point of having markets in the first place if only "insiders" invested and traded their little secrets. So the SEC somehow has to make people at least believe everything is on the up and up. A few high profile busts might just do the trick. Cue federal inmate No. 55170-054, aka Martha Stewart.

Sometimes we here need to really step outside the realm of logic and ponder things while keeping in mind how other humans actually behave. Good God, giving them even more of a free hand to game the system will leave us all living in tent cities (hoovervilles). To think they wouldn't find a way to fuck it up? Look what they do already.

 

[Claverhouse]

Sometimes we here need to really step outside the realm of logic and ponder things while keeping in mind how other humans actually behave.

And, per contra, this is the exact reason why penalties against barely-provable malfeasance cannot work: people are gonna do these things anyway. Any economic system is subject to gaming of one sort or another: and having confidence that people, 'capitalists' in this case, will not game the system merely because the things they do are considered wrong by others ( or by the courts ) is futile. I've always considered the libertarian trust in 'honest markets' as a touching tenet of faith by the religiously insane.

Personally, I think the thing to do is to change the system entirely rather than attempt reform; but if going for the latter, it might be better to prune away the endless new financial instruments that through over-complexity mean few understand them and establish revised --- non-complex --- tax codes, than go after those scapegoats who are occasionally caught just doing exactly what one would expect them to do, if one has a affably low opinion of human nature.

One British prime minister --- a conservative --- once jeered at the Stock Market as 'a Casino'. If one plays in a casino owned by the Mob, it is tiresome to complain that they have rigged the machines to favour the house.




An interesting article from Arabic Knowledge:
Why Insider Trading Is Hard to Define, Prove and Prevent

Rajaratnam, said by Forbes magazine to be worth $1.3 billion, has denied any wrongdoing, and is free on a $100 million bond. The federal complaint accuses him of obtaining inside information to execute trades that earned Galleon $12.7 million between January 2006 and July 2007. Other illegal trading produced millions more in profits, according to law enforcement officials, who said the inside information involved earnings and acquisitions, among other data.



​

I have no idea why someone who is worth --- even mainly on paper --- $1.3 billion wants more money.





Claverhouse