I remember seeing stories about programmers with access to credit card databases getting indicted for trading on the information. This is a legal version of the same thing, and also probably any attempt to make it illegal would be unenforceable.
Unlike the credit card case, these hedge funds are not affiliated with the companies whose stocks they are trading. In addition, the number of cars in a parking lot is not expected to be confidential. They are simply using available tools to make an observation, and using that observation to influence a trading decision.
I see it as just a quantified and scaled up version of, say, noticing more Tesla cars on the street, and choosing to invest. I think making something like that illegal would only be harmful to the stock market and investors.
One distinction is whether or not there's a duty of confidentiality owed by the possessor of the information with respect to the source of the information (the "non-public" element of "material non-public information"). It doesn't seem here there would be any duty of confidentiality. Presumably the programmers in your example owed a duty of confidentiality to their employer or contract counterparty.
I mean, you don't necessarily have to make it illegal.
1. It's from hedge funds, and you can invest in a hedge fund today and reap the benefits of their strategies yourself
2. There exists a gap right now, where a startup or data analysis firm could provide this kind of information to smaller investors through some kind of subscription model.
3. Ultimately the government itself could "level the playing field" by either gathering this information through other channels and releasing it (BLS or SEC style) or by replicating the strategies and releasing it.
I think #3 could be viable. We already require businesses to share very important and actionable info with the government, and since everyone does it, the risks of one firm having data leaked and another not are mitigated. (SEC requires public reports, BLS takes private data and aggregates it for higher level views) If the government required businesses to report data to them on a weekly or monthly basis regarding things that are being satellite tracked, they could release this information on a set schedule to basically demolish the ability of institutional investors to gain secret information to bet against the public positions
Precisely. It's unfair for the little guys, but lot's of stuff is unfair... such as most of high speed trading, and the people who use arbitrage to skim from the index funds that use predictable purchasing.
