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  #11  
Old 11-30-2007, 08:19 AM
Tater10 Tater10 is offline
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Default Re: I Think I Have A Partial Answer

My 2 cents...

During an ethics course for cbot floor traders, there were many different scenarios thrown at you. For example, you heard the broker has a huge buy stop at 110.00. Is it ethical try and run the stop? (buy everything below 110.00, trade a 1 lot at 110, and have the broker buy all his 110s from you.) Of course, they kept changing the scenario just a little bit until you and the broker were basically in kahootz, and you were sharing profits at lunch.

What the exchange was trying to imply was this: As soon as a trade does not involve risk for both buyer & seller, it is certainly against exchange rules. If the risk is not the same for each party, you are in a grey area, and you better hope for a jury that sees it your way.
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  #12  
Old 11-30-2007, 08:58 AM
adios adios is offline
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Default Re: I Think I Have A Partial Answer

[ QUOTE ]
When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. ....

[/ QUOTE ]

Not necessarily.
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  #13  
Old 11-30-2007, 11:06 AM
ahnuld ahnuld is offline
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Default Re: I Think I Have A Partial Answer

but david, what you said is not insider information. It is available to anyone of the public who wants to do a thourough investigation. Would you buy a retailer without first going into the store and at least getting a feel for the clientel and vibe the store is trying to give off? I know I wouldnt. Thats a standard part of investing, along with the numbers.

Thats why desertcat will often call the CEO/CFO of those small companies hes investing in, or visit them if he has the opportunity. Its similar to your monoploy machine example. Its NOT inside information, but buried information that anyone with a shovel and go find easily. The other guy isnt getting screwed due to II but due to his laziness.
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  #14  
Old 11-30-2007, 11:34 AM
Mark1808 Mark1808 is offline
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Default Re: Reopening Insider Information Debate.

It has always been my understanding that it is illegal to trade on MATERIAL NON PUBLIC information. Where there is a direct link to a company insider the guilt is obvious, however their can be instances where their is no direct link and guilt can't be so easily determined. It is therfore up to the SEC and the Courts to decide what MATERIAL NON PUBLIC information is.

The laws are intended to help those that are not on the inside but actually they hurt market participants who do not see all information reflected in market prices.

In the three cases you cited I personally would not trade on any because I belive they all constitute MATERIAL NON PUBLIC information. In reality I believe most insider trading cases are never discovered or prosecuted.
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  #15  
Old 11-30-2007, 11:41 AM
johndenver johndenver is offline
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Default Re: Reopening Insider Information Debate.

The knowledge that there is a line for a monopoly product in a public place is not private info, DUCY?

In your terrorist example, the terrorists are not insiders of any company, therefore it is not insider or illegal trading, its the equivalent of knowing a good weatherman who says there will be a lot of hurricanes this season and then you go out and short oil stocks. perfectly legit.
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  #16  
Old 11-30-2007, 11:50 AM
CrushinFelt CrushinFelt is offline
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Default Re: Reopening Insider Information Debate.

Not sure why everyone is speculating. I'm also not sure why the consensus of people on an internet board would justify a conclusion.

SEC Page on Insider Trading

Or just email the SEC.
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  #17  
Old 11-30-2007, 11:58 AM
Mark1808 Mark1808 is offline
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Default 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 ]

The SEC does not outlaw having an edge, if they did it would be illegal to use TA.
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  #18  
Old 11-30-2007, 12:27 PM
CrushinFelt CrushinFelt is offline
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Default Re: I Think I Have A Partial Answer

[ QUOTE ]
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.

[/ QUOTE ]

This is so obviously insider trading.

[ QUOTE ]
As far as someone overhearing executives and then trading on it, my take would be that he gets off

[/ QUOTE ]

He'd only get off if they couldn't prove he was acting on information that he overheard. If they could absolutely prove that he had the knowledge, and that that knowledge led him to purchase the stock, he would most certainly be guilty of insider trading.

[ QUOTE ]
... that the executives reimburse those who lost money due to their carelessness.

[/ QUOTE ]

I'm not sure exactly what you mean by "reimburse", whether you mean the executives shell out their own cash or if they do something with company money. Either way I've never heard of this happening. Each decision the executives make should be to maximize shareholder value, regardless of what has happened in the past.

[ QUOTE ]
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.)

[/ QUOTE ]

It does not matter if you came upon the information accidentally or not.
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  #19  
Old 11-30-2007, 01:40 PM
Jimbo Jimbo is offline
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Default Re: Reopening Insider Information Debate.

[ QUOTE ]
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.


[/ QUOTE ]

Really? Let me help, hypotheticals like this do not make any profit for us in this forum. It is akin to people who wonder why you don't play in the "Big Game". In some forums I imagine people really care whether or not you could beat the game or not, here unless we could profit on you playing your existence in or out of the game doesn't matter at all.

Jimbo
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  #20  
Old 11-30-2007, 02:23 PM
Groty Groty is offline
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Default Re: I Think I Have A Partial Answer

There is a big difference between "insider information" and material non-public information. Hedge funds happily pay for information they think will give them an edge. They retain the services of industry specific consultants, market research firms, forensic accounting specialists to identify bogus accounting at firms to short, bankruptcy specialists and valuation specialists when they're looking at distressed situations, etc. Anything for an edge.

Suppose I'm a hedgie who exclusively retains the best market research firm in the world who specializes in identifying sales trends at retail establishments.

I want information on sales trends at ABC Corp. and XYZ Corp. The firm I retain spends 6-8 weeks conducting surveys at malls, counting customers browsing the stores in various cities, conducting interviews with suppliers of both ABC and XYZ, etc. Finally, the firm reports back to me that based on its world class research, it believes ABC Corp. will have a terrific selling season, offering few promotions and discounts. It believes XYZ Corp. missed an important shift in a fashion trend, sales will go poorly, and it anticipates alot of promotional activity and discounting to clear inventory. I review the sell side research and believe the Street expectations underestimate the strength at ABC and the weakness at XYZ, so I go long ABC and short XYZ.

I paid the market researcher to give me what I believe is proprietary information that is not being fully discounted by the market. I laugh at the guys selling their cheap ABC shares to me, and snicker at the guys who are taking the other side of my XYZ shorts.

This type of thing happens every day.
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