Comment by mdeck_ | Hacker News Reader

Comment by mdeck_ | Hacker News Reader

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> What's not being said here is that for the trader to have timed his bets so precisely, the reporter would have had to tell him when the story was coming out.

Based on what are you speculating this? I just looked at the indictment, which is linked in the article. Page 8 shows that the timeline between the relevant inside activity and the article’s appearance in Bloomberg running to multiple weeks or even a month. More generally, I don’t see anything that would require an inside trader to know exactly when a news story on these kinds of topics is going to come out. If they know a stock is likely going way up SOMETIME in the near future, that is enough to conclude that the trade is a sure bet. So, no need for a specific tip (as to article timing) from the reporter, and therefore presumably no need for complicity by the reporter.

*I do not intend this comment to mean I believe the actual reporter actually was not complicit. I don’t know the facts of this case beyond what is stated in the story linked here.

From the story:

> Peltz bought Ferro stock via others’ accounts, culminating with his last purchase at 9:37 am on March 15, 2016, according to the indictment.

> Around six or seven minutes after that final purchase, Bloomberg posted a scoop by Hammond and another Bloomberg reporter under the headline, “Ferro Said to Have Received Takeover Approach From Apollo,” a major private-equity firm.

A 6-7 minute gap implies coordination and foreknowledge of when the story would go out.

I imagine that if the story has been published at 9:31 the purchase at 9:37 wouldn’t have happened and some other transaction would have been his last purchase. He may or may not have been aware of when the news would be published.

That is logically plausible. An insider purchase that occurs minutes ahead of a market-moving event is merely circumstantial evidence, but it is very strong circumstantial evidence.

One thing to note is that Peltz bought options as well as stock. Options suffer time decay. That is, all other things being equal, their value decreases with the passage of time. The better you can time your purchase to immediately precede a market-moving event, the less time decay matters.

In addition, Peltz and his associates started selling their positions within a minute of the scoops being published. Do you think they just happened to be looking at their trading screens during that minute of the day? I don't think they would have left that to chance.

(Edit in response to the comment below: Bloomberg scoops do not appear on the open Internet for at least 15 to 20 minutes after their publication on Bloomberg terminals. So RSS wouldn't explain trades within a minute of publication. If Peltz and his friends were Bloomberg terminal subscribers, they could have set up some kind of alert there, sure. But still, not something you want to leave to chance... Even if you have your phone with you at all times, you're not always able to respond to the alerts that come up.)

>Do you think they just happened to be looking at their trading screens during that minute of the day?

Or they set up something like an RSS feed and had their phones ring when a keyword was mentioned. Knowing the story is coming is enough to make sure you're prepared.

Even if you did have advanced knowledge of when it was supposed to publish you would do this, so they can't betray you or nothing like a time zone mistake can ruin everything.

>Even if you have your phone with you at all times, you're not always able to respond to the alerts that come up.

So you hire someone who is always able to respond. Both parts that yous claim are convincing circumstantial evidence just seem like expected behavior that could be entirely scripted. "Buy all x below y, after z happens sell all x" would lead to both things happening.

You’ve got your causation backwards.

He made a series of purchases... ok... of course his last purchase was shortly before the story was published. As to this being his last purchase, well of course—why would he keep buying after his insider advantage had evaporated? At that point there would be nothing more to take advantage of. Anyway, this does not show awareness on the part of the reporter.

Yes, the fact that his last purchase was close in time could show that he received timing information, but it could be that he was making lots of purchases over time and simply stopped once the story came out.

You note that he started selling after the scoops were published. Again, this doesn’t prove anything about the reporter’s (non-)complicity. I.e., OF COURSE he started selling after the story published. What did you expect him to do? He was waiting on the story to be able to trade on effects of its publication. Once it was published, the stock’s price would have shifted (presumably upwards) based on those facts—no more reason to hold the stock!

He bought options, which have time decay. Ok, but we don’t know that he bought options expiring within a few days or weeks rather than months. Anyway, these deal scoops were going to come out sooner or later—but reporters want to avoid being scooped, so they typically come out sooner.

Overall, I’m not convinced there’s anything here. Of course a criminal trial would/will make this all clearer...

I don't think I do. To me it looks like some last-minute greed. He would have been smarter to keep his transactions further from the scoop.

But as I said, the nearness in time only implies coordination. I can't prove it. A trial might, or might not. I doubt that all the communications between the reporter and Peltz's burner phones were recorded.

The expiration date on the options would be interesting to know. If they were very short-term options (lower time decay) only slightly out of the money (higher time decay), that would be even stronger evidence.

The sales within a minute of publication are also strong evidence that Peltz knew what was coming when. You don't want the off chance of a sudden stock market crash to get in the way our your insider trading...

> The sales within a minute of publication are also strong evidence that Peltz knew what was coming when.

I don’t agree. If you day trade in a stock it’s totally normal to watch the newsfeed filtered for it and react to stories within minutes.

> As to this being his last purchase, well of course—why would he keep buying after his insider advantage had evaporated?

So is your claim that they were constantly refreshing the Bloomberg website for weeks? A 5 minute gap is quite suspicious.

They stated the direction of information flow in the article: The feds allege that Peltz used disposable “burner” phones and encrypted apps to communicate with a journalist, and that the reporter provided “material nonpublic information about forthcoming articles” which Peltz used to trade in the market “just prior to publication of an article about each company written by the reporter.” The indictment describes “numerous contacts” between Peltz and a reporter, including at least one in-person meeting

Thanks, I should have included that up top, but can't edit now. I think the key words there are "just prior to."

Other material information is that the story would be published at all.

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