The Eddie Murphy rule and information embargoes
econlife.com
econlife.com
That's how I understand it. And it feels like a leaky dam with fingers stuck all over it.
What are the major, huge, "no-one will go for that" changes that might simply replace the dam?
If we apply a Tobin Tax? If we time box trades to every five minutes? If we end trading on margin? Place derivatives under insurance law ?
Or is it that experienced players have a huge incentive to fleece inexperienced players and that's just the way of the world, and the casino needs to have really good pit bosses, or there is no casino?
And yes, this has been talked about endlessly. Heck, some people have proposed even further restrictions; for example, in practice, the first and last hours that the exchange are open tend to have the highest volume, so why not only keep the exchange open for those two hours?
If releases like this were scheduled for 30 seconds into a 5 minute box, basically any trader that cares would be able to react inside the box. We could say 99.9% for the sake of argument.
I can't exactly state whether it's a good idea overall, but the idea that it might not catch literally everyone doesn't really matter. It's an extreme example of letting the perfect be the enemy of the good, when it comes to this single aspect.
It would equalize the field. However it also means unexpected expenses cannot be handled. Furnace breaks, even though you have plenty of $$$ in stocks you are unable to get it fixed. (I know a retired person who was forced to buy a new car with cash because the bank didn't accept their > $million in investments as proof they could pay for a small loan)
It's a statement about strategy, not about suggesting regulation.
Or maybe I remember wrong.
It's how the market opens every morning and closes every afternoon [1]. There is still an advantage to low latency--the closer your get your order to the submission deadline, the more information you can incorporate into it.
[1] https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Openi...
Cryptocurrency seems to refute this assumption. I'd be curious to see if these fairness regulations actually lower capital costs for companies more than they cost to comply with.
I don't think nanosecond-sensitive trading should be a thing, personally, but sweeping changes to the way security exchange works seems less likely than societal collapse. Most apparent experts insist that letting algorithmic money vacuums operate is "good for liquidity," and that there is no viable more-fair alternative. I don't really buy it. IMO the obstacles to something better are just public ignorance, industry inertia, and a deeply lacking interest in fairness, i.e. corruption.
You do realize those "apparent experts" are mainly those ones making money from it (or are closely associated with them)?
I also think the best policy national is for everyone to pay me $10 daily. And I can give you hundreds of pages in support as to why that is. And after I've made a few tens of millions of that, I can buy you an army of "apparent experts" that will agree with it.
And for starters, by ensuring that money is moving daily (to my pocket), regardless of if a person is sitting on the couch at home watching tv all day, "greatly increases liquidity".
I'm likewise very aware that that's a factor in people's defense of the status quo.
It just shifts things from "free money to whoever has the best spy-network or paid preferential access" to "free money to whoever builds a system to place orders milliseconds faster than others."
Lets imagine it on a planetary scale, you have planets in this particular layout currently.
A - B - C
If planet A releases news, planet B will get the news and be able to reply to it before planet C and there no way to do anything about it unless you come up with superluminal travel.
Now, some number of months, years later as the planets orbit you can get A - C -B in which planet B would be left out.
You not only have the time for full information to get to planet C, you have to withhold information from B until planet C's reply is already in flight back to planet A.
It's true that "Being Much Closer On A Closer Planet" might someday be part of that debate, but I think we've got plenty of closer non-spacetime issues to tackle first.
Evidence for this is that in 2012/2013 insider trading was detected due to the latency between DC and Chicago:
* https://www.cnbc.com/2013/09/24/some-traders-got-no-taper-de...
* https://www.theverge.com/2013/10/3/4798542/whats-faster-than...
So as long as news is released early in the period, then everyone has plenty of time to receive the information. Again assuming you're talking about planetary scale within the same solar system.
If you're talking about within the US or on earth, you simply give a buffer for speed of light to transit across the us and "very sufficient" time for computation/calculation.
There will always be some delta. Ie a company near wall st had 5mins minus 1 millisecond to calculate, while a company in california had 5 mins minus 100 milliseconds to calculate. But if they have 5 mins to digest and calculate the news, the difference those few milliseconds make isn't really important anymore.
Investing should prioritize making the correct decision over making the faster decision. Right now, too much of profit is simply being able to make the faster decision.
It's like playing an RTS against and AI with horrible strategy but has APM through the roof. Yes they're winning, but it's not really interesting or beneficial insights it's providing.
But if you have a strategy that can win with only 10 APM you must've come up with something really deep and insightful about the game.
I suppose users might try to avoid that by breaking up a buy/sell order into a bazillion tiny orders, but that could be curbed by transaction-costs.
"The SEC's complaint alleges that, between July 1 and 6, 2022, Anthony opened a new brokerage account using a fraudulent application on which he overstated his personal income and then made $1 million in bogus deposits from his bank account, which held only nine cents at the time. The complaint also states that, before Anthony's deposits reversed for insufficient funds in his bank account, he used "immediate access" credit extended to him by his broker-dealer to purchase $199,956.65 in securities. According to the complaint, Anthony's broker-dealer discovered the scheme before Anthony could make any profits, froze his account, and liquidated his holdings."
https://newsletterhunt.com/emails/37239
https://www.sec.gov/litigation/litreleases/lr-25816
https://www.sec.gov/files/litigation/complaints/2023/comp258...
- 20 years old in 48-Hours
- 21 years old in Trading Places
- 22 years old in Beverly Hills Cop
And only 19 years old on SNL and hugely famous.
I agree Dan is fantastic but I think the rule is correctly named.
It is true that Jamie Lee then sees the news about the report, and they all kind of have a collective realization about it. I think it can be argued that they all played a role, but if you have to pick someone, I'd argue that Eddie's line is the beginning of the idea.
Actually, reflecting on it further, I think that if this were real life, I would personally give them all credit, but it being a movie, I give Eddie's character the most, if not all, the credit.
But now you got me thinking about another question -- who actually delivered the crop report to the USDA? Beeks was locked in the cage, so someone had to actually deliver the real report. Who did that?
I haven't seen it in a while, but Wikipedia's plot summary says:
> The group deliver the forged report to the Dukes in Beeks' place.
I think they like meet him in a parking lot and it's dark so they can't tell it's not him?
Maybe this is a good excuse to watch the movie again sometime soon.
I feel the same way.
I'm happy I managed to provoke such a conversation. If because of this, just one person interrupted their work so they could stream Trading Places, well... perhaps we've made the world a better place. Ahem.
edit: and I for some reason feel delighted that my post turned into one of those controversial ones that gets upvoted and downvoted multiple times for no apparent reason. Dan Aykroyd's greatness should provoke controversy. Is he merely great, or the greatest?
Basically they got the report before the dukes and changed it.
Louis showed the need to get back at them. Billy showed the way to properly get back at them with no possible actionable item. Ophelia showed what the dukes were doing and a possible thing to get at them with. Coleman showed that they need to get that report first and find out which way it went.
They all played a part. They all even helped finance it.
It was a very nicely written piece with each character playing in character to help solve the problem proposed by the main character.
> up to 10 seconds before live comments were broadcast on television or internet streams
Ten seconds is a long enough time for your "if so," which is what I would guess happens in this specific circumstance.
I am an amateur in this space, but in general there are a lot of misconceptions about HFT, because the details are highly technical. See the debates over "paying for order flow," for example. I think it's hard to characterize these systems because, well, they are proprietary. In my understanding, most HFT folks rely on a combination of fundamental and technical analysis, more than sentiment analysis. HFT is more of a game of "make a small amount of money trading all the time" than "wait until some news breaks and reacts to it."
And before spitballing further, consider the 'good faith' rule. Are you acting on the insider information in good faith? If not, do not do that thing.
Should I be expected to know that was information improperly obtained, particularly because of the massive premium cost of the subscription implies that it's possible that something improper is going on?
If everybody expects you to disclose that information in twitter than you are okay. However if the information is supposed to be disclosed on a SEC form (8k, and 10q are the most likely) than putting it on twitter first could get you in trouble even if you don't trade at all since someone who watches the SEC filings will not see your twitter notice)
Minor nitpick here, but with futures you aren't shorting in that you never borrow. You are simply writing a futures contract which makes you the seller. So when you write the contract you are obligated to sell/deliver at that price on the futures delivery date.
this is a bit different from options in that a futures contract buyer has to take delivery and the seller has to deliver. Where as for an options contract the buyer has the right but not the obligation to exercise it.
You then cancel your obligation out by later buying a contract that obligates you to take delivery on the delivery date. In this case since you bought the contract later when the market crashed you are buying delivery at a lower price, thus fulfilling your delivery obligations and locking in a profit.
No shorting or borrowing happens in this instance.
A few random fun facts about futures.
1) there aren't insider trading rules like there are for equities. This makes sense when you consider that McDonalds can move the market if they chose to create a new product. Not allowing McDonalds to trade in the futures market would mean they can't hedge their input needs.
Similarly oil companies use futures to hedge their selling prices for oil. If you had insider trading laws like we do with equities they couldn't trade as they have insider knowledge of their market moving needs.
2) A few years ago oil traded negatively for a month, this meant you actually got paid to take delivery of oil. This happened not because oil was worthless( it was still worth the market rate) but because you need to take delivery of the oil on the delivery date.
And oil can't just be stored in the your garage. You need to have pre arrange storage in Cushing, Oklahoma or arrange for a rail car to ship your oil out on that exact date.
As you would expect oil storage being heavily regulated is finite and rail cars are expensive and booked months in advance so once the storage and rail delivery options were full you'd have to pay someone else for their prearranged storage or rail delivery.
And the holders of these storage and shipping options were able to charge a ransom for them as contract buyers had to take delivery and thus had to arrange storage or shipping. More than a few retail investors got hosed on this buy buying futures when the price dropped to half of what a barrel was worth not fully realizing that a) they'd need to pay for storage and b) not fully realizing that the price of oil didn't have a floor at zero, it could infact go negative.
I could see there being different rules like "primary" players are allowed but "secondary" players aren't allowed. That way McDonalds could buy pork futures before the McRib comes back, but the CEO can't use insider info to front run pork futures before the McRib comes back.
Closer to non-existent. Same for foreign exchange.
> different rules like "primary" players are allowed but "secondary" players aren't allowed
Trying to delineate markets this way is how Enron became a quasi hedge fund while many banks busy themselves running warehouses. One set of rules is simpler and more efficient, particularly for something as utilitarian as commodities, where you're concerned with efficiency more than fairness.
> the CEO can't use insider info to front run pork futures before the McRib comes back
I don't think there would be a commodities violation in this. There could be a securities violation, in that the CEO is misappropriating gains that belong to the shareholders they have a fiduciary obligation to.
There's an NPR article about this same topic: https://www.npr.org/sections/money/2013/07/19/201430727/what...
"Winthorpe and Valentine have contracts allowing them to buy millions of pounds of orange juice in April for 29 cents a pound, and to sell it for $1.42 a pound. They sold high and bought low. They're rich. The Dukes made the opposite bet and went broke."
As long as it keeps the rich getting richer it will be implemented and become the law