The argument can be made that insider trading isn’t actually a bad thing as long as it’s legal, precisely because allowing that information to trickle into the markets destroys alpha. Anyone who thinks hedge funds aren’t constantly trading on insider information has their head in the sand.
Of course then you have problems where people with private information are incentivized to leak that information, which is bad for national security and other areas where secrecy is needed, but we already have laws protecting that information without adding insider trading to them.
It would need to be studied and to my knowledge no one has done that work yet, but I haven’t seen anyone establish why insider trading is a net bad for society, other than intuitive reasoning.
Indeed. The prevailing mood in this thread is a sort of mutual understanding that insider trading is obviously bad, and the only point worth debating is how to regulate it in this particular instance. Instead, I feel like we should back up a couple steps and seriously investigate the assumption that insider trading is at all detrimental.
I fear we're still deep in the "somebody, somewhere, might be making a profit" bog.
Germany has more permissive insider trading laws, and public participation in German capital markets is much lower. Insider trading laws inspire confidence in the market for non-insiders, the average public.
Permissive insider trading laws and public participation in German capital markets may not necessarily be correlated. There can be other reasons why Germans choose not to participate.
But, I do agree that (at least) an attempt to make insider trades more transparent does help inspires confidence.
Well they only publish trades ~30 days later. There's no real chance of front-running a politician and for all you know they could've closed their position before the 30 day period ended. Plus, if people follow them into the trade (i.e. people buy because Pelosi bought) that only moves the price in the politician's favor. It's not like politicians are running crazy strategies that you can figure out from their trades, so I can't really imagine it creating any incentive to hide trades
Once their trades are done, publishing them should only increase their alpha. I mean, Buffet's purchases can move the price before he's done buying stock, but congresspeople don't move that much cash.
No, it would be the opposite. If people think they have access to privileged information then they will follow their trades, making them profitable even if they are bad trades.
First movers always win.
>I would prefer a public registry listing all congressional trades
Wouldn't your proposal obscure congressional trading as well, because they want to preserve their alpha by not publishing their trades?