Slashdot Mirror
US Busts Insider Trading Hackers
An anonymous reader sends news that U.S. authorities have dispersed an insider trading ring that broke into remote servers to grab press releases before their official publishing date. The group hacked into organizations called PRNewswire, Marketwired, and Business Wire, taking as many as 150,000 press releases over the past five years, including those involving earnings reports. The information was sold to other people who used it to buy and sell stocks. The nine people targeted in this sting netted approximately $30 million, while an SEC lawsuit targeting 32 individuals says the take was more like $100 million. Their scheme is a new type of distributed insider trading that didn't rely on leaked information from employees of any of the targeted companies. "They ran this like a business. They provided customer support: The hackers allegedly set up servers for their customers to access their information, and 'created a video tutorial on how to access and use one of the servers they used to share the Stolen Releases.' They responded to customer feedback ... Their fees were performance-based, and the performance was audited."
is a huge joke. Just close it down. It's very little about investment anyway. It's mostly about people having inside information grabbing cash from people who don't. And high frequency trading. The sad thing is that Economists don't seem to see this as a problem. Well, maybe this type of event on a much larger scale could actually do good by showing how bad things really are.
they make billions not millions so different rules apply
It would be illegal because it was insider trading so yeah that is a really fucking bad example of something that wouldn't be insider trading.
Reacting quicker to publicly released information is not illegal, no matter how much you personally hate high frequency trading - just because you ensure you have an advantage in the speed of reaction over other people doesn't make it insider trading. Lets say that HFT is banned, reacting to releases before other traders can still net you a huge advantage, even if you are only allowed one trade a second or minute. Its that first trade (either sale or purchase) at current market prices which can make your profit.
So HFT is banned, releases are via email or direct notification and all trades have to be manually entered - how quickly does the press release reach your inbox, how quickly can you type, what if your email or notification server is backlogged, how quickly can someone scan a release for the relevant details (should I buy or sell?), and how quickly can you enter those details into the system.
There are always ways to shave time off of reactions, no matter what approach you take.
But the high frequency trading purchases and sales are, effectively, technologically assisted "pump and dump". They don't hold most stocks for even 60 seconds, and rely on the "forgiveness" of the puchasing system to discard trades they don't ever actually complete, to avoid transaction fees and to discard trades which might lose them money. The positive feedback of one HFT making a few puchases bumps a price incrementally, the next HFT buys some on speculation, the first sells and buys more, and they heterodyne off each other and the other shortsellers until the stock price hits a cap imposed by the other, slower, negative feedback in the market. Then they both shortsell on the way down, draining the potential profits from other, longer term investors on the way up and the way down.
HFT makes its money, not off of investment, but off of pure "arbitrage", off the churn in the market. It's quite destructive and drains the profit right out of normal buying and selling.