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Insider Trading

Wallstreetatheist
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6/11/2012 7:01:20 PM
Posted: 4 years ago
Does anyone want to debate on this?

I'll take pro on, "Insider trading should be legal."
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MouthWash
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6/11/2012 9:29:22 PM
Posted: 4 years ago
What are you rambling about? What is 'insider trading?'
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DetectableNinja
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6/11/2012 9:30:46 PM
Posted: 4 years ago
At 6/11/2012 9:29:22 PM, MouthWash wrote:
What are you rambling about? What is 'insider trading?'

Do you really not know?
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thett3
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6/11/2012 9:33:30 PM
Posted: 4 years ago
Is this under the status quo? IE where the state has the current interests and obligations it does? Or must your opponent justify the existence of a state first (bc without a state nothing is technically illegal)
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Wallstreetatheist
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6/11/2012 10:17:02 PM
Posted: 4 years ago
At 6/11/2012 9:33:30 PM, thett3 wrote:
Is this under the status quo? IE where the state has the current interests and obligations it does? Or must your opponent justify the existence of a state first (bc without a state nothing is technically illegal)

It would be better if I phrased it as, "Insider trading is generally advantageous." That way we can focus on the main issue without delving into the philosophy of monocentric law and the existence of the state as a coercive entity.
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darkkermit
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6/11/2012 10:32:55 PM
Posted: 4 years ago
I'm torn. In one case, it will make the markets more efficient. On the other hand, this seems like it would benefit the rich greatly at the expense of the poor.

There's also kind of a perverse incentive problem. If insider trading is legalized then it can create incentives to obtain information through illegal mechanism (ex: privacy invasion, corporate espionage).
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Aayu
Posts: 65
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6/11/2012 10:48:50 PM
Posted: 4 years ago
At 6/11/2012 10:32:55 PM, darkkermit wrote:
I'm torn. In one case, it will make the markets more efficient. On the other hand, this seems like it would benefit the rich greatly at the expense of the poor.

There's also kind of a perverse incentive problem. If insider trading is legalized then it can create incentives to obtain information through illegal mechanism (ex: privacy invasion, corporate espionage).

The insider traders can easily get insider trader like gains through open market repurchases.
Wallstreetatheist
Posts: 7,132
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6/11/2012 10:55:34 PM
Posted: 4 years ago
At 6/11/2012 10:32:55 PM, darkkermit wrote:
I'm torn. In one case, it will make the markets more efficient. On the other hand, this seems like it would benefit the rich greatly at the expense of the poor.

How and why do you think the latter would occur?

There's also kind of a perverse incentive problem. If insider trading is legalized then it can create incentives to obtain information through illegal mechanism (ex: privacy invasion, corporate espionage).

The incentive to gain information through those means still exists with or without insider trading laws. Furthermore, if more insiders could act on the strengths and weaknesses of a company and reflect it in the stock price, there would be less of a need for the kind of acts you listed. Regardless of the IT laws, stealing a person's property is not legal. Invading a person's property is not legal. Coercing another individual is not legal. There are also repercussions for those violations in reputation and under current law.
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darkkermit
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6/11/2012 11:36:18 PM
Posted: 4 years ago
At 6/11/2012 10:55:34 PM, Wallstreetatheist wrote:
At 6/11/2012 10:32:55 PM, darkkermit wrote:
I'm torn. In one case, it will make the markets more efficient. On the other hand, this seems like it would benefit the rich greatly at the expense of the poor.

How and why do you think the latter would occur?

The rich would be the one's who would gain access to the information first. They have the connections the average joe doesn't.

There's also kind of a perverse incentive problem. If insider trading is legalized then it can create incentives to obtain information through illegal mechanism (ex: privacy invasion, corporate espionage).

The incentive to gain information through those means still exists with or without insider trading laws. Furthermore, if more insiders could act on the strengths and weaknesses of a company and reflect it in the stock price, there would be less of a need for the kind of acts you listed. Regardless of the IT laws, stealing a person's property is not legal. Invading a person's property is not legal. Coercing another individual is not legal. There are also repercussions for those violations in reputation and under current law.

It doesn't matter what the law says, rather it matters the incentives it creates. I remember in freakonomics they discussed how having people pay for trash collection just caused people to dump their trash in the woods. It created perverse incentives. It doesn't matter if its legal or not. If a person got it through illegal means, he/she could say he/she got insider information but doesn't have to explain where. However if insider trader is legal, then a person who steals private information can be convicted under terms of "insider trading" rather then invasion of privacy, since the latter is harder to prove.
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NixonianVolkswagen
Posts: 481
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7/14/2012 5:50:32 PM
Posted: 4 years ago
Presumably insider information already effects the investing patterns, etc., of insiders? In the sense that if you're working for an entity that's doing wrong things, or to be clearer, is making unwise business decisions, then you won't invest in your own company. I can't imagine that human behavior is such that if insider information leads the insider to believe that their employer is going to lose the edge in its respective market, that their investments wouldn't be amended accordingly. Although, compared to what's been discussed so far, I figure this is pretty limited.

I can sort of see how insider trading might improve efficiency in the short-term, leading to more accurate trades, investment, etc. However, in the long term my impression is that it'd be more problematical. After all, it gives a serious advantage to industry insiders - and could actually relatively diminish growth in those sectors, as investors may prefer to invest in sectors where it's less likely they're at an information-disadvantage. Couldn't insider information be seen as an information monopoly, or oligopoly, whatever, retained by those inside? Although, I'm open to the notion that an information-market might develop out of it, I'm not sure how that market could be regulated?

Eh, it's late and these are just my first impressions. :)
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Wallstreetatheist
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7/14/2012 7:41:18 PM
Posted: 4 years ago
At 7/14/2012 5:50:32 PM, NixonianVolkswagen wrote:
Presumably insider information already effects the investing patterns, etc., of insiders? In the sense that if you're working for an entity that's doing wrong things, or to be clearer, is making unwise business decisions, then you won't invest in your own company. I can't imagine that human behavior is such that if insider information leads the insider to believe that their employer is going to lose the edge in its respective market, that their investments wouldn't be amended accordingly. Although, compared to what's been discussed so far, I figure this is pretty limited.

I can sort of see how insider trading might improve efficiency in the short-term, leading to more accurate trades, investment, etc. However, in the long term my impression is that it'd be more problematical. After all, it gives a serious advantage to industry insiders - and could actually relatively diminish growth in those sectors, as investors may prefer to invest in sectors where it's less likely they're at an information-disadvantage. Couldn't insider information be seen as an information monopoly, or oligopoly, whatever, retained by those inside? Although, I'm open to the notion that an information-market might develop out of it, I'm not sure how that market could be regulated?

Why do we need regulation? It's proven to be ineffective in the financial sector. One only has to look at the case of Bernie Madoff's largest ponzi scheme in history, besides Social Security. The SEC received letters starting in the 1990's that Madoff was orchestrating a ponzi scheme, yet nothing was done about it. If we had more inside trading, flaws like this would be observed and the market would correct itself, ensuring the better protection of assets and a more accurate stock price.
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NixonianVolkswagen
Posts: 481
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7/15/2012 4:33:20 AM
Posted: 4 years ago
At 7/14/2012 7:41:18 PM, Wallstreetatheist wrote:
At 7/14/2012 5:50:32 PM, NixonianVolkswagen wrote:
Presumably insider information already effects the investing patterns, etc., of insiders? In the sense that if you're working for an entity that's doing wrong things, or to be clearer, is making unwise business decisions, then you won't invest in your own company. I can't imagine that human behavior is such that if insider information leads the insider to believe that their employer is going to lose the edge in its respective market, that their investments wouldn't be amended accordingly. Although, compared to what's been discussed so far, I figure this is pretty limited.

I can sort of see how insider trading might improve efficiency in the short-term, leading to more accurate trades, investment, etc. However, in the long term my impression is that it'd be more problematical. After all, it gives a serious advantage to industry insiders - and could actually relatively diminish growth in those sectors, as investors may prefer to invest in sectors where it's less likely they're at an information-disadvantage. Couldn't insider information be seen as an information monopoly, or oligopoly, whatever, retained by those inside? Although, I'm open to the notion that an information-market might develop out of it, I'm not sure how that market could be regulated?

Why do we need regulation? It's proven to be ineffective in the financial sector. One only has to look at the case of Bernie Madoff's largest ponzi scheme in history, besides Social Security. The SEC received letters starting in the 1990's that Madoff was orchestrating a ponzi scheme, yet nothing was done about it. If we had more inside trading, flaws like this would be observed and the market would correct itself, ensuring the better protection of assets and a more accurate stock price.

It seems like what we have with the financial sector is a failure of regulations, rather than a failure of regulation. In principle, with inescapable margins of error, this industry could be regulated effectively, at-least compared with the current situation. There are a number of reasons, in my opinion, for the current regulation regime's failures, including a suspicious relationship between electoral & ideological funding and a lack of necessary government scrutiny, the absence of adequate whistleblower protection in the United States (and its confusing disuniformity, to say nothing of the fact that there is some evidence that employees often are unaware of the protections that are in place), and so forth.

With respect to insider trading, that would depend upon the market. After all, if a genuine market develops, then it will favor the wealthy - those who can afford to pay for the best/most information will have a superior market-perspective. Whereas poorer businesses will not. This will lead, broadly speaking, to the success of big business (in the first instance at-least). There's actually an argument to be made that insider trading's quality would be lessened, as now it occurs between colleagues, or whatever, rather than in a more formalized way - if formalized, companies will try to distort the information-market in their favor, so dishonest "insider trading" will be sold alongside the true, in order to grow businesses.
"There is an almost universal tendency, perhaps an inborn tendency, to suspect the good faith of a man who holds opinions that differ from our own opinions."

- Karl "Spartacus" Popper
NixonianVolkswagen
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7/15/2012 5:26:46 AM
Posted: 4 years ago
At 7/15/2012 4:42:44 AM, Wallstreetatheist wrote:
Do you think insider trading should be a crime?

Probably. Perhaps not every single insider trade has a negative effect, but overall as a phenomenon, I think so, yes. It seems to destabilize competition, and, makes a market out of advancement (after all, if I make significant $ selling information, then I can use that $ to improve my position in the business-world).
"There is an almost universal tendency, perhaps an inborn tendency, to suspect the good faith of a man who holds opinions that differ from our own opinions."

- Karl "Spartacus" Popper
Wallstreetatheist
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7/15/2012 6:35:43 AM
Posted: 4 years ago
At 7/15/2012 5:26:46 AM, NixonianVolkswagen wrote:
At 7/15/2012 4:42:44 AM, Wallstreetatheist wrote:
Do you think insider trading should be a crime?

Probably. Perhaps not every single insider trade has a negative effect, but overall as a phenomenon, I think so, yes. It seems to destabilize competition, and, makes a market out of advancement (after all, if I make significant $ selling information, then I can use that $ to improve my position in the business-world).

Care to debate the subject?
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NixonianVolkswagen
Posts: 481
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7/15/2012 7:37:54 AM
Posted: 4 years ago
At 7/15/2012 6:35:43 AM, Wallstreetatheist wrote:
At 7/15/2012 5:26:46 AM, NixonianVolkswagen wrote:
At 7/15/2012 4:42:44 AM, Wallstreetatheist wrote:
Do you think insider trading should be a crime?

Probably. Perhaps not every single insider trade has a negative effect, but overall as a phenomenon, I think so, yes. It seems to destabilize competition, and, makes a market out of advancement (after all, if I make significant $ selling information, then I can use that $ to improve my position in the business-world).

Care to debate the subject?

I'd like to, but I feel that I'm presently too ignorant. Maybe I could look into the subject more thoroughly and get back to you?
"There is an almost universal tendency, perhaps an inborn tendency, to suspect the good faith of a man who holds opinions that differ from our own opinions."

- Karl "Spartacus" Popper
Wallstreetatheist
Posts: 7,132
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7/15/2012 9:47:49 PM
Posted: 4 years ago
At 7/15/2012 7:37:54 AM, NixonianVolkswagen wrote:
At 7/15/2012 6:35:43 AM, Wallstreetatheist wrote:
At 7/15/2012 5:26:46 AM, NixonianVolkswagen wrote:
At 7/15/2012 4:42:44 AM, Wallstreetatheist wrote:
Do you think insider trading should be a crime?

Probably. Perhaps not every single insider trade has a negative effect, but overall as a phenomenon, I think so, yes. It seems to destabilize competition, and, makes a market out of advancement (after all, if I make significant $ selling information, then I can use that $ to improve my position in the business-world).

Care to debate the subject?

I'd like to, but I feel that I'm presently too ignorant. Maybe I could look into the subject more thoroughly and get back to you?

You seem rather intelligent, so I'd like to debate you on this topic in a while. Happy researching!
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