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-   -   Reopening Insider Information Debate. (http://archives1.twoplustwo.com/showthread.php?t=557711)

David Sklansky 11-30-2007 02:02 AM

Reopening Insider Information Debate.
 
I'm wondering why no one seemed too concerned about the fact that people here had wildly different takes on whether or not my scenarios constitute insider trading and that no conclusion was reached.

Simple question. I have come upon information that gives me an irrefutable giant edge because no one else has it. Or because those others who have it are precluded from trading on it. I came upon this information without breaking any laws. (It may or may not be by accident. You tell me if that matters.) I am not an "insider". But the guy who is taking the other side of my trade has cost himself money because of my willingness to trade on my knowledge. Is this illegal or not? This thread doesn't end until everybody agrees.

mtgordon 11-30-2007 02:11 AM

Re: Reopening Insider Information Debate.
 
Or until you decide to start a new thread about it?

I mean come on, I understand you kind of run this place but this seems a bit ridiculous.

johndenver 11-30-2007 02:14 AM

Re: Reopening Insider Information Debate.
 
afaik:

trading on non public info is illegal

if one of your friends or associates who is an insider gave you this info, it is illegal, and you stand a good chance of being prosecuted

if you overheard this info or stumbled upon it in some way, it is illegal, but you stand no chance of being prosecuted

Shoe 11-30-2007 02:15 AM

Re: Reopening Insider Information Debate.
 
Is this insider trading?

I am the only person to study a company's annual report. I make my decision based on that. But I am the only person who read the annual report, therefore, that gives me an irrefutable giant edge because no one else has it. Is that insider trading?

SenatorKevin 11-30-2007 02:25 AM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]


Simple question. I have come upon information that gives me an irrefutable giant edge because no one else has it.

[/ QUOTE ]

More information is needed to come to a conclusion here. In some cases you could be considered trading with inside information and sometimes you wouldn't be.

[ QUOTE ]

Or because those others who have it are precluded from trading on it. I came upon this information without breaking any laws. (It may or may not be by accident. You tell me if that matters.) I am not an "insider". But the guy who is taking the other side of my trade has cost himself money because of my willingness to trade on my knowledge. Is this illegal or not? This thread doesn't end until everybody agrees.

[/ QUOTE ]

Different story now. (The way you worded this, it sounds like two different scenarios) 90% of the time this would make you an insider. The other 10% is that legal gray area that you really would want to avoid.

SenatorKevin 11-30-2007 02:30 AM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]
Is this insider trading?

I am the only person to study a company's annual report. I make my decision based on that. But I am the only person who read the annual report, therefore, that gives me an irrefutable giant edge because no one else has it. Is that insider trading?

[/ QUOTE ]

Impossible scenario. Someone has to audit those statements before they're published. :-)

jaydub 11-30-2007 02:45 AM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]
Is this insider trading?

I am the only person to study a company's annual report. I make my decision based on that. But I am the only person who read the annual report, therefore, that gives me an irrefutable giant edge because no one else has it. Is that insider trading?

[/ QUOTE ]

Presumably you are the CFO so yes. Otherwise you are constructing a nonsensical edge case.

Oh and where's your crown [censored]?

J

David Sklansky 11-30-2007 03:04 AM

I Think I Have A Partial Answer
 
Most of you, including Jason Stausser are wrong. I'd make a small bet on it. Just using pure thought.

When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. Except that he should have realized that someone might have been doing that to him. It is a legitimate part of the game. And as unpalatable as it might sound, the same is true if I overhear two terrorists on their way to bomb the Bellagio (especially if I report them first). The possibility that something along those lines is going on should be part of your calculations. Unless you are DesertCat. It is ridiculous to have laws that expect people to refrain from stuff like that.

The only time the answer is unclear, I would think, is if the information is specifically related to undisclosed aspects of a business that is only privy to insiders. That is why I would think the executive who sells a competitor's stock short when he can't buy his own, is likely breaking the law. As far as someone overhearing executives and then trading on it, my take would be that he gets off but that the executives reimburse those who lost money due to their carelessness.

SenatorKevin 11-30-2007 03:13 AM

Re: I Think I Have A Partial Answer
 
[ QUOTE ]
Most of you, including Jason Stausser are wrong. I'd make a small bet on it. Just using pure thought.

When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. Except that he should have realized that someone might have been doing that to him. It is a legitimate part of the game. And as unpalatable as it might sound, the same is true if I overhear two terrorists on their way to bomb the Bellagio (especially if I report them first). The possibility that something along those lines is going on should be part of your calculations. Unless you are DesertCat. It is ridiculous to have laws that expect people to refrain from stuff like that.

The only time the answer is unclear, I would think, is if the information is specifically related to undisclosed aspects of a business that is only privy to insiders. That is why I would think the executive who sells a competitor's stock short when he can't buy his own, is likely breaking the law. As far as someone overhearing executives and then trading on it, my take would be that he gets off but that the executives reimburse those who lost money due to their carelessness.

[/ QUOTE ]

So does this example of the Monopoly machines match the scenario you used in the original post? If it is, then I think your original post is very misleading. Making some observation about slot machine usage would hardly give you a huge edge in trading. There are so many inputs that you don't know about. Such as the configured payout. Perhaps the machines are paying out a significantly higher percentage in order to win over new players and such.

David Sklansky 11-30-2007 03:51 AM

Re: I Think I Have A Partial Answer
 
The fact that my information is not a slam dunk is beside the point. Maybe the terrorists will chicken out. An edge is an edge.


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