Slashdot Mirror
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.
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]
Comment removed based on user account deletion
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!
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 ;-)
Comment removed based on user account deletion
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."
Comment removed based on user account deletion
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 :-)
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.
Comment removed based on user account deletion
Hmm, that's right as long as you substitute players with "swindling con artists" and gamblers with "individual investors." They don't both have legitimate arguments because the players are doing things which should be illegal. Shenanigans like buying stock with full knowledge of what it will be in the future and trading stocks through methods that aren't on the market so that they can get different prices than are available to the rest of us.
That's basically how hedge funds work, since they cannot get a better yield without additional risk without cheating, they cheat. And to the detriment of everybody that plays by the rules. There are exceptions, but by and large the more clever the methods advertised, the further away you should run from and investment firm. Everything is crafted so as to screw over the outsiders.
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.
Comment removed based on user account deletion
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.
Comment removed based on user account deletion
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?
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!
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; "
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.
Comment removed based on user account deletion
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.
So you're in favor of repealing the laws against fraud and false advertising?
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.
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!
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?
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."
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."