Re:Why Is Spoofing Bad?
by runj__ on Thursday April 23, 2015 @07:33AM
(#9425987)
There's an interesting argument for insider trading being legal, the basic idea is that it helps propagate information faster than it would if people just keep the information to themselves and results in a more fair stock price at any given time. Which is sort of the argument for why HFT is legal.
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The flip side of this is that publishing information is a better way to transmit information than placing orders on an exchange by many orders of magnitude.
If insider trading is legalized, the incentives are stacked even further towards intransparency in corporations, because it gives management yet another reason to try to hide what is going on. That will lead to more information being hidden on purpose. Sure, some of that information leaks back out via orders and price movements, but at least to me it seems overly optimistic to hope that the overall amount of publicly available information increases.
The most convincing case I heard for making insider trading legal was in a 2003 Wall Street Journal op-ed [0].
[0] http://www.wsj.com/articles/SB104786934891514900 (Paywall) [1] https://www.google.com/#q=%22the+case+for+insider+trading%22 (Google search results, top result)