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Insider trading being illegal encourages participation in markets for people outside the company. As well as discourages intentionally messing up within the com

by dktp 3y ago

Insider trading being illegal encourages participation in markets for people outside the company. As well as discourages intentionally messing up within the company and profiting from short selling The argument against it is that markets would be more efficient if people were allowed to trade on information not yet available to the public Seems like a worthy tradeoff to me

phpisthebest 3y ago
>>As well as discourages intentionally messing up within the company and profiting from short selling While I do not agree with the OP on insider trading being good.... I also think short selling is a net negative and should be banned right along side insider trading
- scrlk 3y ago
  > I also think short selling is a net negative and should be banned Why? The potential losses for shorting are infinite whereas the profit is capped, so entering a short requires high conviction. Stock markets are also a market for information: banning short selling takes away a large amount of information and has negative impacts on price discovery, liquidity etc.
- Nursie 3y ago
  Why? If you think a stock is underpriced, you can buy it and bet your knowledge is superior to the general market’s. Shorting is just the logical reverse, and aids price discovery in the opposite direction.
- auc 3y ago
  > I also think short selling is a net negative and should be banned right along side insider trading How would you incentivize people to find fraudulent companies like Enron?
graemep 3y ago
> The argument against it is that markets would be more efficient if people were allowed to trade on information not yet available to the public If that is true, then markets would be even more efficient is such information was made public immediately.
- dktp 3y ago
  That sounds about right. It is hard to make all information public asap (with all the regulation), so I would assume it would be hard to get rid of the wiggle room between when an insider can place a bet and the information actually becomes public Matt Levine's most recent article touches on insider trading pros and cons (in relation to sports betting) and is, as usual, a great read - https://archive.is/jJ25g https://archive.is/jJ25g

by dktp 3y ago

phpisthebest 3y ago

>>As well as discourages intentionally messing up within the company and profiting from short selling While I do not agree with the OP on insider trading being good.... I also think short selling is a net negative and should be banned right along side insider trading

scrlk 3y ago
> I also think short selling is a net negative and should be banned Why? The potential losses for shorting are infinite whereas the profit is capped, so entering a short requires high conviction. Stock markets are also a market for information: banning short selling takes away a large amount of information and has negative impacts on price discovery, liquidity etc.
Nursie 3y ago
Why? If you think a stock is underpriced, you can buy it and bet your knowledge is superior to the general market’s. Shorting is just the logical reverse, and aids price discovery in the opposite direction.
auc 3y ago
> I also think short selling is a net negative and should be banned right along side insider trading How would you incentivize people to find fraudulent companies like Enron?

graemep 3y ago

> The argument against it is that markets would be more efficient if people were allowed to trade on information not yet available to the public If that is true, then markets would be even more efficient is such information was made public immediately.

dktp 3y ago
That sounds about right. It is hard to make all information public asap (with all the regulation), so I would assume it would be hard to get rid of the wiggle room between when an insider can place a bet and the information actually becomes public Matt Levine's most recent article touches on insider trading pros and cons (in relation to sports betting) and is, as usual, a great read - https://archive.is/jJ25g https://archive.is/jJ25g