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Federal Judge Bars Instant Publishing of Analysts' Stock Tips
An anonymous reader writes "Big Banking firms Barclay's Capital, Morgan Stanley, and Merrill Lynch successfully obtained an injunction against theflyonthewall.com, Inc., preventing them from immediately publishing the firms' stock upgrades and downgrades. This case could have far-reaching consequences concerning internet communication and publication of news." Here's some interesting analysis from Paul Levy, via Dave Farber's Interesting People list.
What are analysists?
I'm having a brain fart at the moment. Anyone care to explain to a noob what kind of implications this could have?
Living With a Nerd
it would turn every trader into a day trader.
of course the majority already are.
i thought once I was found, but it was only a dream.
U.S. District Judge Denise Cote said Theflyonthewall.com engaged in "systematic misappropriation," essentially getting a "free ride" from its quick publication of upgrades and downgrades that can move stocks higher and lower.
Cote issued a permanent injunction requiring the Summit, New Jersey-based company to wait until 10 a.m. to report research from the three banks that was issued before the market opens, and at least two hours for research issued thereafter. The bulk of research is typically issued before the open.
While the banks had sought longer delays, Cote said: "This time frame preserves incentives for the firms to create and disseminate research reports to their investor clients, while still recognizing the inevitable, fast-moving, and widespread informal communication of recommendation on Wall Street."
The banks welcomed the ruling. Merrill spokesman Bill Halldin called it a "milestone in regaining control over the distribution of our proprietary research and preserving the value of our investment ideas for our clients."
So, let me try to get this straight. There is a game. Let's call this game "Market". Market tracks the players on a leaderboard. The scores of the players go up and down, based on how they perform in-game. People are allowed to bet on The Market, and its players. There is a lot of money to be made in the ebb and flow of players' score. Furthermore, the players in the Market have their scores based on how many people are betting on them. It's so lucrative, people have made scripts to rss how each of these players are doing. Whoever has the most information can "game" The Market, and make a lot of money.
The players of The Market are complaining that people sharing information about the game as quick as possible hurts them. The gamblers are shouting "information wants to be free"!
I think both the players and the gamblers have a valid argument here. In my book, however, the players autofail the game because they are using the police power of the government to control the gamblers. If they love The Market so much, they should play the game as it is, not change the rules.
I hate these filthy neutrals, Kif. With enemies you know where they stand but with neutrals, who knows? It ... sickens me
Is it too much to ask to spell-check your stuff, /.??
Of late, I've been thinking Slashdot should remove the 'Submit' button and only have a 'Preview' button - 'Submit' would only be available on the preview page. That way, you'd be forced to preview your post before you could submit it. Slashdot could even delay presenting the 'Submit' button for 15 or 30 seconds, which might force people to read their posts before submitting them. Of course this might delay the much-coveted "frist post!!" opportunities, but c'est la vie.
I'm not stock monkey either, but I think this has to do with freedom of information. Specifically that once Morgan Stanley publishes their stock upgrades and downgrades, it's pretty much public information. That fact that this information has been barred is the item of interest.
From the Morgan/Stanley side, it might be appropriate to call it a trade secret. From the end user side, it becomes common knowledge so unless there are agreements with each user not to leak the knowledge, it seems like this law is invalid to my eyes. It seems to me that they are legislating a solution for Morgan/Stanley's lack of security.
Basically, this company was publishing the results of various investment bank's research before their clients could read and act upon it. The legal reasoning behind it could equally be applied to Google News republishing other people's headlines, for example. More seriously, it means that effectively, you now have a sort of "copyright" created by the courts on factual information that you possess. I leave it to slashdotters to come up with ways this might be abused....
[FUCK BETA]
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It might be frowned upon, but it certainly isn't (in most jurisdictions) illegal. It should be pretty obvious that facts are, in general, not something that should be subject to restriction without a damned good reason, and "waaah" doesn't really cut it, for me.
[FUCK BETA]
From the Article:
The banks welcomed the ruling. Merrill spokesman Bill Halldin called it a "milestone in regaining control over the distribution of our proprietary research and preserving the value of our investment ideas for our clients."
Hrm... so if I were to publish my proprietary information online, our say, outside of my house, then people read it and used it before I could make money from it I can sue them for losses? Wow! what a novel idea banks!
I've got a better one, why don't you lock the content away behind a login and share it with it client until you believe it be of insufficient value, then release it? Brilliant!
"Big Banking Firms Barclay's Capital, Morgan Stanley and Merrill Lynch successfully obtained an injunction against theflyonthewall.com
and violated the "hot news" doctrine by "misappropriation" of the fact that "buy" or "sell" opinions had been expressed.
What is the "misappropriation" of the fact that an opinion has been expressed by someone?
Isn't that a form of free speech?
SELL, SELL, SELL!
Obviously these reports will affect prices, so you tell clients, wait a bit so they can react, and then tell the public. That's market manipulation plain and simple. A more fair ruling would say they have to release the reports publicly at the same time they tell their clients. But then this is a Manhattan federal judge who knows who he works for ;-)
Slashdot does precisely that for logged in accounts with low karma. Only high karma accounts have the Submit button immediately available. Anonymous Coward never has the submit button available immediately - only after a preview do you get the captcha and an accompanying submit button.
To gain access to the nearly identical analysis and consensus estimates that these firms publish in lockstep?
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It appears that theyflyonthewall.com can appeal after one year. Apparently the judge saw the fact that the bar was basically making up for lack of security on the financial institutions part.
From TFA: "The judge said Theflyonthewall.com may apply in one year to lift the injunction if the banks do not take reasonable steps to halt the unauthorized distribution of research."
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Stock ratings are not facts. They are at best opinions, although I think it would be better to describe them as works of fiction. And works of fiction are subject to copyright :-)
Only high karma accounts have the Submit button immediately available.
Is the karma level required for that higher or lower than the karma level required to shut off ads? They let me turn off ads, but I only get a Preview button...
Every stupid monkey with a title, believes they now have manipulative control over some portion of the populace.
Our right to keep and bear arms had this consideration in mind.( don't start your stupid blather about word for word written, the intention of founding fathers was made clear historically and in their writings) Just every now and then someone should just outright kill (not murder, this is revolt) a stupid judge who forgets who he is and where he is. They should leave a note on the sacrifice detailing his crimes against the people of the several states as a warning to other likeminded judiciary.
This could also be expanded to anyone working for the government against the constitutional interests of the people. Be mad as hell, don't take it anymore. People fought and died for freedoms you don't have in your generation due to greed , corruption , and control mongering. Take it back and put their heads on pikes.
Sort of like the trade secret that the big boys get to buy on a current price knowing what it will be in a short period of time. Wall Street really is filled with crooks and thieves. Barring analyst recommendations from being published in that respect is largely pointless. The recommendations are for institutions anyways, and are not generally made on any basis useful to the small time investor.
But it's not factual information, it's analysis and opinion. You wouldn't call an opinion piece on the economy as factual information, because everyone knows that an opinion piece is a subjective interpretation of the facts. Why would you do the same for a stock tip. This has nothing to do with Google News because Google News redistributes the news and not opinions.
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The short answer is money.
The long answer is that traders start at 7am by reading reports and recomendations.
They traders make decisions about what they will trade and what position they will take early on based on this information.
They will pay a LOT of money to money to get this information as early as possible.
The information providers want to be able to sell this valuable data and analysis.
This won't affect day traders so much, who try to squeeze trades in between the various peaks and troughs in prices during the day (playing with graphs basically).
What this means is that the people that are releasing this information will only have to wait until 10am and the information will still be released into the public domain that morning anyway.
It is is very important to trades who are trying to take long term positions and want to get a price that makes it worth while to trade the stock. (if you have to pick a trader take side with this is the one you want.)
On what basis? What you're suggesting is that insider trading isn't wrong or horribly damaging to the functioning of the markets. It's basically just a variation on the pump and dump stock scams dressed up to look legitimate. People buy and sell when the ratings change, despite there being no good reason to base it on a change of ratings.
You can gussy it up all you like, but it's definitely not behavior which should be allowed if we're to have a stock market that functions as anything other than an elaborate scam.
Theflyonthewall.com just moves it's servers & business outside the US. I hear Antigua might be a good choice, since they've already gotten a WTO judgment against the US and so wouldn't be quick to cooperate with the US to take down the site.
It looks like the US government is determined to drive businesses, particularly internet-based or -dependent businesses, to other countries. Then they whine about trade imbalances and people wonder why business is fleeing the US.
Strat
Progressivism (aka US 'Liberalism'): Ideas so good they need a police/surveillance-state to enforce.
Let's be clear on this, the issue has nothing to do with having up-to-the-second stocks news or not. It has nothing to do with an RSS aggregator having a feed from a news site.
It is about a news aggregator publicly disseminating PRIVATE information - buy/sell is professional advice and not news. Professional advice is subject to a two-party contract - it can be given confidentially. This is leaked advice.
Usually leaks aren't much of a problem because there's copyright and so on, they can't just reproduce the detail necessary to completely steal your advice usefully. But, in this case all that's really interesting is the company name and whether the word after it is "buy" or "sell". The entirety of the substance can be in the article. Contrast this with say the problem with the leak being that it is embarrassing - here the "news" is not the substance of the advice as advice, it is the fact that it is embarrassing.
Secondly, absolutely key to the value of that information is extreme timeliness. It only has value if you have that information before most other people, after which point the information becomes obsolete. Thirdly, the person giving the advice is also of high importance. "Sell Microsoft" has a greatly different value as information when Merrill Lynch says it than say, Bob down the pub. So people were paying thefly to get Merrill Lynch's advice more cheaply than buying it from Merrill Lynch.
The point the judge upheld is that thefly were not announcing news, they were reproducing a private professional opinion - and an opinion that was of value because of whose it was. Nobody wanted this as some retrospective news about some event, they wanted to know this information for the exact same reason and no other reason than those for which Merril Lynch's clients were paying for it.
This is little different than say, someone finding out the Coke formula, setting up a factory and marketing it as Coca Cola. The one difference is that in this case the product is "knowledge". The judge seems to have been quite savvy in differentiating the "product" and "knowledge" elements on the basis of the extent that timeliness was important.
Remember when that Hulk film from 2003 blamed the internet and texting for ruining opening it's weekend?
Will movie studios now ask for opening weekend injunctions on news sites too from reporting on plot/story and whether it sucks or not, before most theater-goers had a chance to watch it?
I mean, while we limit freedom of press for business concerns, we might as well see what other industries would like.
It is also worth bearing in mind that the Recommendations are not objective facts, but rather, subjective judgments
The fact that person X has indicated opinion Y, is an objective fact.
If I tell you that I think Obama's approval rating will go up by 3.68% next week. Then your first ammendment right guarantees you can tell your friends "Mysidia thinks Obama's approval is going up 3.68% next week"
etc, etc.
That's not to say I can't claim copyright to my words, or that you could reproduce my statement exactly for that purpose, without infringing on copyrights.
But there is this matter: when a person is a public figure, or an organization is a large corporate entity, whose every word is of public concern --- then the fact they expressed an opinion, is an objective fact, that should fully enjoy the ironclad protection of free speech rights provided by the 1st amendment of the US constitution.
1. There are a couple of dudes, who just make up the latest “trends”.
2. Which of course is where they have their money in.
3. Now the dumb people who listen to them buy those s(t)ocks.
4. And the prophecy fulfills itself. (Yep, that’s the “...” point in all those plans.)
5. PROFIT!
Of course in stocks, after it starts to rise because of the dumb people, the more intelligent got a real reason to invest, and so it goes even higher. In fashion on the other hand people do it because they are such losers that they think they would be left out and not accepted otherwise.
So it’s all rigged. But if you know a bit of social engineering, and are really full of yourself, you can be a rigger too.
My motto: I don’t follow trends. I MAKE them. (And so should you. :)
Any sufficiently advanced intelligence is indistinguishable from stupidity.
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This is not a case of insider trading, it is aggregation and analysis of publicly available information being used to facilitate smarter trading amongst their clients. Most of those clients are long-term investors, and insider information is almost exclusively used for short-term gains. While there may be overlap in legal and illegal activity among firms and clients, there isn't really a case to be made that this is an example of that sort of thing.
Yes, there is a lot of scummy behavior on Wall Street. It helps to not be confused as to what terms like "insider trading" actually mean when discussing it though, because it detracts from actual meaningful discussion.
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The "players" in your story are the stocks. But the folks complaining about the rapid dissemination of analyses are the middlemen--in your gambling analogy, this would be the house, the folks who want to rig the game in their favor.
I think the court decision here is correct. If the house sells exclusive quick access to its analyses, it's only reasonable for them to demand that they buyers don't republish it too quickly; the information makes it out in end eventually anyway. The republishers are basically leeching off the brokers' analyses.
It's important to point out how little important this is in the grand scheme of things. Stock analyst reports are no better than random at predicting stock performance. Timing the stock market doesn't produce superior returns, nor does short-term trading. Paying for ultra-quick access to these reports in the expectation that they will help you time the market is not a good idea.
Basically, to continue your analogy, the house is selling their predictions about which card's gonna be drawn next. You can pay the normal fee, or you can pay extra if you want them to tell you sooner than they tell everybody else. If you pick the second option, however, the object if you go around and publish your early-access info.
Are you adequate?
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> The current (well-supported) suspicion of banks and stock traders gives the whole article a sinister patina, e.g. "the banks were keeping upgrades and downgrades secret, but theflyonthewall was exposing the information before the brandy-and-cigars set could fully exploit it!"
So we want the public to be well-informed, but not too well informed? This will let the investment bankers keep their dirty little secrets secret for just a bit longer while they offload stock. The public won't know until the stock price dives. Preventing these *facts* from being published flies in the face of an open society. It shows what a dirty rigged game the stock market plays, and how the judiciary and congress plays along with it.
Another example is High Frequency Trading aka Zero Latency trading lets investment banks (not you) set up their computers right next to the NYSE's computers so they get advance notice of a few milliseconds of buy orders. They then buy big and when the other orders come in, the investment banks have already bought all the stock and onsell with a fat mark up. Amazing what these guys get away with, and that congress and the public let them get away with it. Despite the bawling about the bailout, the banks got everything they wanted and are still paying themselves obscene bonuses. Politicians profess outrage but never force their hand. http://www.nytimes.com/2009/07/24/business/24trading.html
The whole market is so rigged the only way the public can make a profit is when *everything* is going up. A good quote by boom roadkill: "We used to we were geniuses the stocks we bought always went up. Then when the bubble burst we looked back and realized it didn't matter what we bought, because everything went up anyway."
Back in the mid 80's, we had this internet thingy (well, we had it in the late 60's and all of 70's and early 80's, but I wasn't on it yet). It was totally free from commercial and political influence. Courts didn't get a say over it, because *they didn't know it existed*. Companies didn't put up banner ads, because there was no web, and no such thing as a banner ad.
At some point, politicians started thinking they should be able to control what happens on it, and companies started buying eyeballs using it. I'm not sure that's going to lead anywhere good. Yes, some of the politician and court decisions will be sensible. But the potential for really huge damage is, well, really huge, especially when the more repressive regimes out there start wanting to control it for their own ends.
I think it was better when it was the wild west, anything goes. Yes, that means abuse, it means people being asses and jerks and scammers. But it had the potential to be a bastion of freedom for all humanity, for all the messiness that entails, that exists no other way. Sadly, that aspect of the internet lasted, from my perspective, about 5 or 7 years, total. I know old timers saw more of it, but anyway it's long over now.
Captcha: audacity.
The whole purpose of the stock market is to get money to the people who can make the best use of it. That is best served by having as much information available as rapidly as possible. How exactly does this ruling go anywhere near achieving this?
The whole point of having a stock market is to get money to the people who can make the best use of it. What this ruling does, as far as I can tell, is impede that process by preventing the dissemination of useful information about who can make the best use of investment capital. In short, while this might or might not be a good ruling from the standpoint of enforcing the law as it exists today, it runs completely counter to the whole point of having a stock market. There should be absolutely no impediment to disseminating as widely as possible information about publicly traded stocks unless it is for an exceptionally good reason (like national security level good).
Going even further, by restricting information like this they are essentially allowing the major players in the stock market to manipulate stock prices. I tell my clients that I will claim stock X will go up and the market listens to me. I do this in such a way that my clients can by their stocks first. Stock goes up because I say it will and I'm a major player. Then my clients sell their stock making a nice tidy profit, all the while I have less incentive to provide good advice because assuming I'm even vaguely plausible this scheme will work. The law is protecting this kind of thing when it should be prohibiting it!
I'm glad you agree information is good for the market in general. If the court ruled against those who produce research for money, a large source of market information analysis would disappear.
While I doubt your post was intended to agree with me, it nonetheless supports the contention that the court ruled correctly in protecting firms who spend time and money to analyze publicly available data and making it available to the public shortly after making it available to those who actually pay to have it produced.
Don't pretend you have the right to data you didn't pay to have produced the second it is available just because it's "unfair" that someone gets an advantage by actually doing work for themselves and their clients.
As a spelling offender I personally would like a spell check button.
I seriously can not spell. I honestly do try to spell correctly but I'm just plain bad at it. Always have been. It's a disability I actually battle with daily. Yes I call it a disability because it affects me everyday. I actively try and improve it but I'm losing ground over the years. I think it's because I have a logical mind and English is anything but logical. There are tricks and rules that are just duct tape over the illogical. I'm constantly saying "is that right".
I don't think a karma related button is going to help spelling or grammar. I have very high karma. So karma solutions are not going to assist me.
On the flip side. I do get very annoyed at people that attack me on a regular basis for simple mistakes of spelling. I mean some people just go off. Like I attacked there home and family kinda going off. All because I couldn't spell swimming pool or something else as equally inane.
This is in part because commercial speech is not as closely protected by the First Amendment as other kinds of speech.
The 1st amendment says congress may not abridge the freedom of any type of speech. There is no exception for commercial speech, and specifically:
"Congress shall make no law [...], or abridging the freedom of speech, or of the press; "
That's OK, there's no law involved here. As far as I can tell the court applied this prior restraint based on no statute at all.
Specifically that once Morgan Stanley publishes their stock upgrades and downgrades, it's pretty much public information.
That's not what was happening. Theflyonthewall.com was publishing information before it was made available, so that their subscribers could benefit from it before the clients of Morgan-Stanley et al.
God invented whiskey so the Irish would not rule the world.
they're basically saying you can't take public information and put it up on your own website.
This essentially guarantees that flyonthewall will win the appeal. They just had a judge who doesn't understand what the internet is.
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I honestly don't understand this. Can someone explain this to me: If the analysts are concerned that their information is being disseminated before they can get it to their clients, why don't they just give the information their clients earlier? If someone else can aggregate all of their data and get it out at 0700, why is it so hard for the people who -made the data- get it out at 0630?
If someone is paying me big bucks to determine the probability that it's going to rain today I'm going to make sure they know what I know ASAP. I'm not going to figure it out then go grab a latte and do a few Sudoko puzzles first while someone else sells my leaked meteorological research to somebody else.
Now look at our courts. Freedom of information is real good but only when it is stale and less useful! Our darling government in its infinite wisdom now decides that its feeble minded citizens must not know any information that might cause excitement or rapid action. Or is this supposedly done to help the banks, so dear to us all, for their recent sensitivities.
My God, if we were allowed free expression we all know that perverts would attack us and poke holes in our panties. And then we would lose everything playing online poker and women could never marry as the men would all be renting whores from the net. And worse yet we would know the lies being told us by those above us little people.
And as we all know, its wrong to have insider information... unless you are a high roller.
It's not insider information. It's an opinion on stock futures and nothing more.
[*] Addendum: freedom of the press is specifically mentioned by the amendment as well, and the 'website' being 'ordered' to not publish stock tips is definitely the press (hence use of the word 'news').
The effect of the order is directly, indisputably contrary to the 1st amendment: they are abridging the freedom of the press.
Use Firefox to post then. It has built-in spell check in text edit boxes. It's no help for grammar, but Slashdot's grammar Nazis aren't nearly as attentive as the spelling Nazis and it looks to me like you don't have many issues when it comes to constructing sentences. Firefox underlines misspelled words in wavy red. Its dictionary isn't what I would call comprehensive, and it has very few entries for jargon or acronyms, but for most vocabularies, it does just fine.
It's no big deal. They'll just need to publish them beyond the reach of the federal justice, which starts 0.0001 from the US border.
Higher. I get both the ad shut off checkbox and an immediate submit button.
So you're in favor of repealing the laws against fraud and false advertising?
The "criminal" sites move to offshore hosts. Business as usual by Monday. A couple weeks at the latest if they're totally incompetent.
get both the ad shut off checkbox and an immediate submit button
As do I, but I've never turned off the ads. Figure someone's gotta pay to keep the lights on...
But there's a fine line between "opinion" and insider trading. How do these tipsters form their opinions ? Usually by being friend of a friend of a friend of a big merchant, and hearing stuff on the grapevine (but don't tell anyone I told you so) etc.
No. Commiting false advertising or fraud is lying in your presentation of goods to change hands and not particularly an exercise of press freedom.
In that case, the speech is not specifically the issue, it is the use of deception to bring someone into a financial transaction
Fraud or False advertising causes a target to participate in a transaction under a false pretense, that they would not want to participate in, if the other party expressed the true nature of the transaction.
Basically, if you are selling something, there can be regulations on how you present that particular product for sale.
This is different from restricting what may be said inside the product, if it's a news publication, for example!
I'm having a brain fart at the moment. Anyone care to explain to a noob what kind of implications this could have?
It means the first amendment doesn't matter when rich people want to maintain an advantage.
So the judge knows the actual barring is baseless, but is doing it to protect these rich banks and their advantages for long enough for them to fix their leaks.
I thought judges were here to uphold laws, not temporally wipe their ass with the 1st amendment in favor of big banks.
The judiciary can't have it both ways when the Supreme Court is promoting an extreme interpretation of the First Amendment (i.e. unlimited corporate donations to political campaigns are OK).
Either the court system recognizes justifiable mitigation of an enumerated Right in order to prevent other Rights from being undermined by it, or they don't. What we heard from SCOTUS in 'Citizens United' was that free speech is absolute, so no more controls on obscenity, defamation, incitement, threats, etc. ...and no controls on the Internet, either.
Not really like Google News because Google only crawls headlines that are published on public web sites, obeys robots.txt, only crawls subscription only sites with permission etc.
The critical element here seems to be that the stuff was being reported before all the paying clients saw it. It is more as though Google bought subscriptions as an ordinary user and used those login details to spider a site behind a pay wall.
There was a case, something like "WWW Communications v. INS," where WWW and INS were both news organizations/aggregators in World War I. One was basically scraping the others' content, reading its headlines on the east coast and selling them on the west coast the same day that the information came out. The Court said that the scrapers were "attempting to reap what they did not sow," I think, creating a sort of prepossessory property interest in the information.
The idea is that if a domain scraper can copy all news content on the web, take away the advertisements, and not pay anyone for it, then there won't be an incentive for people to go to the effort to gather the news in the first place. It was obviously more legitimate in the pre-digital age, and doubly so during a world war, when it was MASSIVELY difficult to assemble transcontinental news on a daily basis, but the point still stands to some degree.
-- IANAL, this isn't legal advice, and definitely isn't legal advice for you. Also, Squee!
This isn't insider information, this is privately conducted analysis of public information. There is a distinct difference - Morgan Stanley has its analysts look at the company, competitors, and any other information they have and make a judgment call on it on behalf of their clients. While such upgrades/downgrades do affect prices, they are not insider information in the same sense of "new secret iPhone killer announcement tomorrow". In theory, anyone could do the same analysis Morgan Stanley did and reach the same (or different) conclusions and so this does not constitute insider info.
I feel that society as a whole and my own safety and welfare specifically has not improved thanks to the government deciding what private citizens can and can't say (along with when they can and can't say it). I'm not much of a slippery slope guy, but I feel that ANY encroachment of the government on free speech outside of our current laws is a surefire way to fall down it.
If this research analysis based on public information is so valuable, it means that same public information wasn't already reflected in the existing stock market prices, which means the efficient market hypothesis is a recognized failure. So why are all our financial laws written as if the EMH were true? Either this "analysis" is no more valuable than a horoscope, in which case the court system shouldn't be trying to suppress it, or else it IS valuable, in which case the financial laws regulating Wall Street should be reformed a hell of a lot.
The efficient market hypothesis is a joke. To get perfect efficiency and instantaneous market reaction you need perfect and instantaneous cause/effect analysis and instant action based on that analysis. That doesn't exist (and can only exist in theory currently), so the efficient market hypothesis does not actually work.
Well someone had time to act on it ... otherwise it wouldn't be leaked. The leaks are pure pump and dump, it simply works best if the "information" is widely disseminated immediately rather than staggered. If it's done staggered buying/dumping frenzies are less extreme.
Analyst reports are mostly pump and dump schemes to begin with of course, this is just a little meta pump and dump scheme on top.
Ideally, the Rappers works should be released on DVDs protected by DCMA, so the innocent don't actually have to listen to pump-and-dump promotion on MTV.
Sent from my ASR33 using ASCII
If they want to keep this information private then they can do so. Just don't tell anyone it, or only tell people with whom them have agreements not to disclose the information. If they also conduct no trades based on the information then no one will know it.
If they wish to keep the information secret they have a simple solution, do nothing with it which would require making the information public. Which is better, having less information available due to a reduction in 'research' of the market or enabling outright manipulation of the market using schemes like the one that was protected by this ruling?
The whole point of having a stock market is to get money to the people who can make the best use of it
Ha Haa Haaa Haaaaa.
The whole point of having a stock market is to transfer wealth to the people who have the most information
There fixed that for you.
If we could persuade bankers to sing on MTV, maybe they would get shot too?
"we have become increasingly concerned about the selective disclosure of material information by issuers. As reflected in recent publicized reports, many issuers are disclosing important nonpublic information, such as advance warnings of earnings results, to securities analysts or selected institutional investors or both, before making full disclosure of the same information to the general public. Where this has happened, those who were privy to the information beforehand were able to make a profit or avoid a loss at the expense of those kept in the dark." [Regulation FD]
So, yeah the SEC agrees that material, nonpublic information is NOT "insider trading" as long as you have an established PLAN to make the material, nonpublic information publicly available LATER. Scummy.
But the SEC also said that you are flat-out wrong to say that these analysis reports only aggregating and analyzing publically available information.
It's not information (in the sense of facts), it's opinion and analysis. Opinion and analysis that the bank has paid money to have performed. It seems perfectly reasonable therefore for them to restrict access to it.
Typical crapdot summary. It has nothing to do with "publication of news" at all.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
The definitions of insider trading make no distinction on whether the trades were based on facts or opinions, only that they may have been based on "material, nonpublic information" and an opinion is still information.
The court's ruling establishes de jure that the analysts ratings and the analysis that led to their ratings is "nonpublic information" (otherwise reporting of it could not be protected) and it would be very easy to prove in a lawsuit that the analysts' ratings are, in and of themselves, "material" in that the stock values do change in direct response to the rating itself,
So this court's ruling means that anyone who has knowledge of an analyst's rating and trades that stock prior to 10am of the day that the rating was released is guilty of insider trading. Not that we have an SEC that will actually bother to prosecute (anybody)....
"The whole point of having a stock market is to get money to the people who can make the best use of it."
Bullshit.
Once a company has been floated and the shares are available in the market place all subsequent trading in those shares is merely a case of the rich squabbling between themselves over which of them is to have the privilege of creaming off the profit from the company.
Share price speculation does not benefit the company whose shares are traded.
The whole point of having a stock market is to get money to the people who can make the best use of it.
That may be why is was created, but it isn't the main reason for it these days. The stock market exists to skim value out of the economy for those who don't actually create value of their own.
This was new to me, so I looked up this "systematic misappropriation" that was cited by the judge. Turns out that this has absolutely nothing to do with copyright. It is based on the The Doctrine of Misappropriation. It is wild, but this is in essence a law created entirely by the judiciary. It is not like other cases where the judiciary is accused of stretching the constitution to the extreme. In this case, the judiciary literally created the law out of nothing.
Stock tips are NOT facts, you've been told that several times.
If you want tips, do your own analys[is]is or pay someone to do it like the banks do.
Sorry to interrupt your enraged rant, but this isn't insider trading.
If the information in question was unpublished factual knowledge (i.e owning an iPad causes/cures AIDS) then it would be.
However it isn't, as would be obvious from reading TFA. These are tips (i.e. our boffins think that because of [econobabble here] Apple is a good buy).
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
If I cant later sell a stock then the only value it has is the dividend. This is more restrictive than is necessary. The problem isn't that stocks can be traded, it's the time scales over which they can be traded. If I see a company that has issued shares to pay for some new project and at 6, 12 and 24 month milestones there will be some indication of the success of this strategy then buying the shares becomes an attractive prospect (if I think their plan will work). The systems existence therefore provides the means to raise capital.
The problem is that by allowing trading over matters of hours and days or even weeks we incentivise short term thinking. 'Next quarter' thinking and the dangerous speculation that results from day trading which benefits no one.
Since many types of share provide a measure of control to the share holder the big problem we need to fix is what we incentivise shareholders to do. There should be restrictions on how quickly you can sell a share after you have bought it so that shareholders have a big incentive to keep a company around for the foreseeable future. This would then be reflected in the selection of board members.
I have no problem with them restricting access to the information. If they do nothing which requires them to make the information public then they can keep it to themselves (and their clients who agree to sign a contract not to disclose the information).
The problem is they want to in effect manipulate the market by keeping the information secret initially, do their trading (or allow their clients to do their trading), then release the information which pumps up the stocks they just bought.
Sadly, this is too often true. I've been watching the non-disclosure craziness around corporate agreements as part of my work for years, as an engineer involved with the products and services and sometimes fixing the IT so those bureaucrats can communicate reliably. The amazing divide between the hammering of the "no insider trading" given to the hourly or non-management employees, and the truly amazing conversations about insider information shared illegally and fraudulently with management in such deals is.... Oh, dear lord, it's pretty amazing.
Keep a good eye on the person who always wants a new, non-standard laptop and the latest cell phone and refuses, absolutely, to allow updates to his laptop. Those seem to correlate well with the people who commit such behavior.
I think you mean "those who are caught using insider information are almost exclusively those who use it for short-term gains." They are a lot easier to spot.
"The last thing I want to do is deal with a bunch of people who want something."
Major Major
Pls mod parent +1: Politically correct!
Sent from my ASR33 using ASCII
Figuring out something nobody else realized does not equal market manipulation in any but the most twisted definitions, so you've provided a false "choice" of less information vs manipulation.
The ruling was about preventing business competitors from publishing data that was leaked in violation of privacy agreements, one of the "solutions" you provided in the second sentence above. You offer a solution and then oppose a ruling that upholds the legality of the solution. Inconsistent much?
Inside information by its very nature isn't doesn't support long-term gains, whether a person is caught or not. It is information that needs to be acted on within a short time frame and requires the liquidation of the position after the publication of the information which causes the price swing. I can't think of a single instance where inside information would be useful in a long term stock position, but that's not to say they don't exist. I'd be interested to hear a theory on the long-term use of inside information. Note, I don't mean the serial use of inside tips over a long period of time, which would all also be short-term gains reaped repeatedly over a long period of time.
You assume that I propose sanctioning the person or organisation who were provided with the information (the innocent third party). If someone publishing aggregated stock tips did nothing illicit while obtaining the information then it is not them who should be prosecuted but rather whoever is responsible for leaking the information to them (almost certainly one of these tipsters clients or someone within the tipsters organisation).
It isn't the "figuring out something nobody else realised" that I'm calling manipulation. It's the creating stock tips, telling your clients the information then trying to keep the information you have given your clients secret by going after people who have done nothing wrong. It's the way they are publishing their results and the way in which they try to keep tha information secret that bothers me.
Did you read the same article I did? The ruling doesn't keep the information secret after distribution to research firms' clients. It prevents third party publication until after the firms have had a reasonable chance to transmit it to their clients.
The poor, poor people who "have done nothing wrong." Basing a business solely on paying people to knowingly and willfully violate confidentiality agreements in order to obtain trade secrets is industrial espionage. Nothing wrong with that, right?
http://www.law.cornell.edu/uscode/18/1839.html
In-depth analysis is not something readily knowable by people in general. It takes a lot of man-hours to compile and distill market data into actionable information. That is the final piece to qualify the analysis as a trade secret.
They are not violating any confidentiality agreements themselves, ergo they have (as far as I'm concerned) done nothing wrong. If you want to go after the people who violated the confidentiality agreement be my guest. When it comes to the distribution of information, especially information about the stock market, we have the err on the side of caution and where ever possible allow the information to spread.
The key difference is that your opinion on industrial espionage being okay is irrelevant to legal proceedings, as it is typically illegal to engage in industrial espionage the US. So, while you may not agree that it should be illegal, the judge was still correct to rule on the side of how the law is written rather than how certain people believe the law should be written.
By all means, try to get things changed so that nobody can be punished for soliciting theft of secret information and then selling it. Until you're successful, don't expect judges to rule in a way you would find favorable.
At no point did I claim that the judge made the wrong decision in interpreting the law. I'm miles away from being able to comment on that intelligently. I'm arguing for what I think the law should be and the reality it should reflect. I have no idea where you got the impression that I felt the judge made the wrong call from a legal standpoint since in another comment further up the page (not one replying to you) I specifically state that the judge may well have correctly interpreted the law.
My apologies for misinterpreting. I was limiting my comments to the merits of the ruling, not what is preferable in a better world.
ISTR (from /., so it may be utter bullshit) that many developed countries make capital gains from share trading much more tax-efficient than actually receiving the dividends from the shares because dividends are treated as income. ISTM that if that is true, it is something which needs to be fixed, and which possibly could be done without hurting anyone but the day traders and really short-term VC-grabbing schemes (since analysts and so on would still be necessary, and you could still make money on your shares, just in a different way). It would probably also reduce the incidence of bubbles like the .com bubble.