PBS aired an interesting [I]Frontline[/I] program this week, titled To Catch a Trader, which traces the investigation and prosecution of various Wall Street firms and individuals for insider trading. The “trader” referred to in the program title is Steven A. Cohen, billionaire founder and owner of the hedge fund SAC Capital. And the insider trading in question involved stocks of publicly-held companies traded on U.S. exchanges.
This story does not relate in any way to our market, but it’s an interesting detective story, nonetheless.
In the stock market, insider trading is defined as trading on “material, non-public information”, and it’s a serious crime. But, in the spot forex market, there are no prohibitions against “insider trading”, despite the fact that it occurs on a daily basis inside the big banks at the top of the forex “food-chain”.
And that’s something that every forex trader should be aware of. But, it’s a topic for another thread.
You don’t want that market to be fair. No one benefits from an efficient market (or I suppose everyone benefits equally), in the same regard if you make the market so rigged then the little fish won’t even enter then this is also not good. So philosophically if 0 is fully efficient and 1 is total shark tank, I’m not really sure where the forex market really in reality truly is. My guess is probably 0.70, but given the media people probably think it’s more like about .25.
It’s a sad fact that inequality drives progress in our society and its inequality that means that people on the wrong side of it ever bother to try to cross over. It’s the entire basis of capitalism.
I wouldn’t be surprised if it’s not just the big banks exploiting insider info. Just think of all the institutions receiving economic data seconds early! But yes, this is topic for another thread.
tha’s exactly why i would never ever trade single stocks - unless i was an insider myself. the only intelligent way to be invested in stocks is an index. no matter which one - industry, country etc… holding single stocks without knowing the companies VERY WELL is simply gambling.