For arguments sake, let me put it this way. Most of ET seems to believe in conspiracies. That the FED is buying up the market. That hedge funds are painting the tape. That some magical hand is holding the market up. Insiders, whether you like it or not, are actually moving the market where it should go to. If a stock should be higher, they are supporting the price and driving the market higher to it's fair value. If the market should be lower, they are pushing the market to a lower price toward it's fair value. They are actually doing the opposite of the so called "manipulators". Now of course I don't really buy into the market manipulation crap nor do I believe insiders have any kind of meaningful effect on a stock price. I'm just making an argument.
If insider trading would be legal the information would get disciminated to the public much quicker because it would not be illegal to spread the news and it would reflect in the price. Making it illegal is the reason Insider trading is so handsomely rewarded in terms of dollars...Kinda like making POT legal...it would make drug dealing profits plunge.
If insider trading were legal, insiders would be the only people that could trade this market profitably. Note that if trading were a zero-sum game (stock market moving sideways, not up), any profit made by one party is coming out of someone else's pocket. Do you want to trade in a market where your "opponents" are corporate insiders who have an absolute edge? You would get squashed in a millisecond. You could not trade the market unless you had information as well.
It would change the game, certainly, as information and the ability to gather information so that one could be informed and add value to the market would be the primary legitimate focus, rather than just looking at price and trading on things that are already factored in. Corporate chiefs, board members etc could still have legal responsibility with civil penalties for acting in any way that harms shareholders. Take away a rich man's fortune with a lawsuit is worse for him than a few years in jail.
that gap or surprise in stock price would almost disapear if it would be legal...do you think insiders are just 2 people in the company inside a room? accountants, attorneys, insiders, top management, lower management people would be able to tell others and the number, news, or pertinent information would be out much quicker....the fact that no one can talk because they could get arrested is the ONLY reason trading on inside information is so handsomely rewarded...this is just my opinion and I am often wrong...
Is this not the point of the rules in the first place - companies want the correct information to be released when it is ready? If we got rid of that rule, information that's conceivably incorrect could reach the market at a higher frequency than is perhaps going on at the moment. ...imo, insider trading is only as valuable as the quality and timeliness of information in the first place. Though isn't this practically the case with everything?
incorrect information or rumors are spread all the time even with this rule. The company obviously cant lie in a press release. Think it through to try to see my point...peace
I'm not sure I'm necessarily in disagreement with you. Regardless, that's why I said "at a higher frequency". Seems to me there are only a few, qualified people who have the correct information (i.e. earnings). These are presumably released as soon as they're ready. I'm sure there are issues with how effective their disclosure timing is - though I'm not sure allowing insider trading is an effective solution for this. I guess my view is that you'd be likely to introduce additional, incorrect information into the marketplace which could lead to increased and unnecessary volatility. Then again, it's possible the quality of information would be directly tied to the market impact of the information in which case it would lower volatility. At this point it's probably obvious that I don't know, with any certainty, the answer. Ha.
Imagine a qualified insider legally being able to tell a hedge fund about earnings and tell them the wrong information...this would definitely help out the small investor