
Study Asserts Startling Numbers of Insider Trading Rogues - luu
http://dealbook.nytimes.com/2014/06/16/study-asserts-startling-numbers-of-insider-trading-rogues/?_php=true&_type=blogs&_r=0
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ScottBurson
Professional traders have known this for decades. Watching for signs of
insider movement and then jumping on has been a popular strategy since
forever. (Of course, you have to know how to read the charts... the signs are
subtle and ambiguous.)

I sometimes wonder if we wouldn't be better off without the charade of insider
trading laws. We could just drop them and stop pretending the water isn't
shark-infested. Ironically, Wall Street might oppose this as it might make it
harder to attract suckers to the game (if I may mix metaphors).

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ISL
Some level of uniformity in not-bilking-your-shareholders expectation is
probably a good thing, lest management contracts become laden with redundant
boilerplate.

Insider trading rules certainly hurt the efficient market hypothesis. If your
goal is accurate pricing above all else, insider trading laws are bad news.

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discardorama
This is the "Brazilian brothers" case mentioned in the article:
[http://dealbook.nytimes.com/2013/10/10/two-brazilian-
brother...](http://dealbook.nytimes.com/2013/10/10/two-brazilian-brothers-to-
pay-nearly-5-million-in-insider-trading-case/)

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Bootvis
Another reason could be that there are some really smart dudes profiting using
only public or non-material non-public information. It seems hard to
disentangle those two sources of information and I can't find anything about
it yet in the paper.

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apaprocki
Also if you have the raw feeds you can try to detect suspicious activity and
then use that activity as a signal for your own trades. If you trade based
upon public data (what winds up being insider trading) without knowing the
inside information is it insider trading?

~~~
foobarqux
But where would that activity come from in cases other than the relatively few
activist and hostile takeovers?

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apaprocki
Why there is a sudden surge in options activity with no underlying stock
movement or news could be very, very specific to the stock and requires
understanding of why that might happen. I'm not sure computers have all the
info they need (at this point in time) to make that determination with precise
accuracy. But, you can simply ask the computer to notify you when it occurs so
that you can use your brain to try to make sense of it.

~~~
foobarqux
The question is how could that movement be a result of impending M&A activity
without insider information?

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Bootvis
Well observations of public information that are not widely disseminated or
are hard to interpret. For example

1) Change in behavior of insiders because of regulations which leaks
information, e.g. sudden silence on a certain subject

2) Observed activity of key persons, e.g. the CEO of a company being spotted
with other CEO's

Mosaic theory[1] allows such things under the right circumstances and this
would influence price.

[1]:
[http://en.wikipedia.org/wiki/Mosaic_theory_%28investments%29](http://en.wikipedia.org/wiki/Mosaic_theory_%28investments%29)

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chollida1
I'm not very surprised by this. Information gets spread very quickly for this
type of activity, infact there are entire funds created around the merger
arbitrage scene.

Typically this information is told to a fund by the investment banker or
company itself, and then the fund would become "restricted" on the company,
meaning once they know a deal is in the works, they can't act on it until the
deal has been reported.

Funds know that they are being very closely watched. Some funds do cheat, ala
SAC [http://www.bloomberg.com/news/2014-04-10/sac-judge-
approves-...](http://www.bloomberg.com/news/2014-04-10/sac-judge-approves-
record-insider-trading-accord-with-u-s.html), but the vast majority don't
intentionally trade on the news.

The article didn't mention it but I'd guess most insider trading happens form
individual accounts and not funds. The risk reward just isn't really there for
most funds, compared to individual investors.

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wahsd
Another argument for breaking up Wall Street and other hives of corruption
like Washington DC. There is no reason that those two locations in particular
should need to by physically concentrated around a physical location like
that.

Some will cry and whine about proximity to the transaction switches, but even
that's a policy issue. There is no particular reason that transactions need to
be completed in milliseconds rather than actual seconds or even minutes. There
are no legitimate efficiencies to be had, only corruption of process and
skimming.

The concept of physical co-location of core functions of society and economy
are ripe for corruption and doe not provide any advantages that are not
utterly overshadowed by the advantages of distribution. It is essentially the
transparency and sunlight that disinfects society by spreading out the
corruption making it more easily found and identifiable. Distributed
government and financial sectors are essentially the transparency that
inoculates against corruption.

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a8da6b0c91d
Distributed government services just makes the pork and corruption harder to
control. All the way back in the early years of the Republic Jefferson had to
fight against spreading federal functions and contractors all over the
country. He knew the only hope for controlling waste and pork was to keep it
concentrated in DC.

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ISL
Does anyone have a link to a reliable reference on what does and does not
constitute insider trading in the eyes of the SEC?

Is there a clear definition for what constitutes actionable information?

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alexeisadeski3
I bet they prefer keeping it broad and ambiguous. It's a great US law
enforcement tradition.

