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Comment by projectramo | Hacker News Reader

I guess I'll ask the question: in the US, insider trading is (generally) trading on material non-public information. There are other nuances (various courts have found there needs to be a benefit or not and so on).

Is the law similar in the UK?

Does it even exist for currencies? Presumably not because there is no company to be the insider of?

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>insider trading is (generally) trading on material non-public information

No, this isn't how it's defined in the US. It's completely legal to trade on material non-public information that you collect on your own via research (e.g. satellites looking at retail parking lots).

In the US, it's only illegal if you use information to trade that violates a fiduciary duty (e.g. using non-public information from a CEO).

I have to admit I am confused on this point.

I thought there was one theory that owning the stock makes one an insider because you are an owner.

I find people worried and thinking about this all over the web:

https://www.ibtimes.com/should-hedge-funds-be-concerned-abou...

I think you're misunderstanding their theory of why it would be bad?

In the example where a hedge fund buys information from Best Buy about how many Panasonic TVs they sell, Best Buy may have a duty to Panasonic, and thus are an insider in that context, so if the hedge fund buys that data from Best Buy, they could potentially be trading on insider information.

It's not because they own the stock.

On rereading, that sounds right.

That article appears to talk about whether it is insider trading to trade on information that originated with a public company (insiders) and privately sold - including sales information that hasn't been reported yet in public filings.

There are serious questions about whether that, under US law, would be considered insider trading as it appears to be just that.

Simply owning a single share of stock in a company does not make one an insider. An insider, in the US, is someone who either works for the company, owns more than 10% of a company or has some other kind of fiduciary duty to the company. Insider trading can include anyone trading on any information from insiders even if they themselves aren't.

Mind, this is different in other countries.

I don't remember the exact details, but I remember reading about a guy who hired a team of researchers to find problems in some company's product (I think it was pharmaceuticals), shorted the stock, and then published the results causing the stock price to tank. Totally legal since he wasn't affiliated with the company and the information that was published wasn't misleading.

The UK (and currently EU) law is different. In the EU, even if the party dispensing the material non-public information does so with no benefit or even unknowingly and by accident it is still illegal to trade on that information.

For a more thorough examination, see a recent Matt Levine piece about someone being charged for insider trading after overhearing material non-public information in a public place:

https://www.bloomberg.com/opinion/articles/2018-12-03/inside...

It's probably more accurate to think of insider trading as being about trading on privileged access to information. Being non-public is more about who could, in principle, get that information rather than it being generally available.

In the Brexit case, there couldn't be an insider issue as the polling companies aren't inside anything relevant.

The grey area here is solely due to the law that says that exit polls can't be made public before the polls close. That is separate from insider laws but does relate to a question about what does "public" mean in that law.

In principle you might fall foul of insider trading if you had privileged information from the BofE, say, that they were going to make an unexpected rate move before it was announced. Similarly, if someone on Theresa May's staff bet against the pound on Sunday night, there may be a case as killing the vote on Monday was sure to trash Sterling.

Do you have more about what is considered privileged access? That notion of privilege seems to be a slippery slope.

The UK legislation doesn't use the term: privileged. It essentially says insider information is information that, if it were public, would materially move the value of a financial instrument.

But it's only really applied against someone who uses proprietary information that they gained by dint of their position or contact with someone in a privileged position.

As with all laws like this, it's worded pretty vaguely so that the Court can use discretion.

"Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security."

https://www.sec.gov/fast-answers/answersinsiderhtm.html

And note definitions of insider:

https://www.investopedia.com/terms/i/insider.asp

Insider is a term describing a director or senior officer of a company, as well as any person or entity that beneficially owns more than 10% of a company's voting shares. For purposes of insider trading, the definition is expanded to include anyone who trades a company's shares based on material nonpublic knowledge. Insiders have to comply with strict disclosure requirements with regard to the sale or purchase of the shares of their company.

Note the strategic placement of "anyone"

It is an extremely slippery, the case law and enforcement are both murky and no one really knows what is going on.

Here's Matt Levine again thinking about what insider trading even is and what constitutes privileged information:

https://www.bloomberg.com/opinion/articles/2018-10-15/inside...

In the UK, insider trading as a crime is understood to be trading on non public information no matter who you are. IMO it’s a law which only penalizes UK domiciled investors. A foreign hedge fund can make an inside trade on the UK market, in the US say, by dealing off-exchange with a bank-counterparty in the UK and abroad. The bank-counterparty can just unload the other side of the trade with a UK client. The bank-counterparty, with no knowledge of the motivation of the trade, has done nothing wrong. The foreign hedge fund has done nothing wrong. The UK investor is the patsy, fooled into a sense of confidence by a law that can’t be enforced. But all this is moot for currencies because I think they are completely unregulated. FX is where the big sharks hunt.

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