Is there such a thing as insider trading and insider information?
Perhaps to begin with, we should examine what this means and then decide whether or not it is possible.
An insider is a person who can access an organisations non-public information.
This could be employees handling or accessing valuable data, ranging from the accountants, solicitors, directors, CEO’s and anyone else connected in some way.
This includes friends, acquaintances and even Government officials. Furthermore, if the insider was passing information in the way of tips to "others" , and or if someone owned stock valued at more than 10% of the corporation’s equity, then they too would be seen as insiders.
Therefore, insider trading would occur as soon as these persons engaged in the actual buying or selling of the security.
So it follows, insider trading is illegal if the content is non-public and gives an unfair advantage.
Insider trading is only legal if the information is fair, open and public.
Insider information is a non-public fact of a publicly traded company. When the information forms or is in part at least a source that could provide a financial advantage in a securities market.
In the USA an example of legal insider trading is when the “insider” discloses their buying and selling activities and follows the rules set out by the Securities and Exchange Commission by submitting their proposed financial activities openly and in a timely manner.
The primary task of SEC is to prevent fraud.
Security and Exchange Commission short video:
An example case is when the Securities and Exchange Commission brought charges against Martha Stewart, Broker Peter Bacanovic for Illegal Insider Trading and is definately worth reading on the link below:
Further reading on insider trading information: https://www.investopedia.com/ask/answers/what-exactly-is-insider-trading/
What About Forex?
Insider trading and insider information for Forex is pretty much not a crime unless its a Goverment Official act.
The problem is though, Foreign Exchange is the largest and most liquid market on the planet and because of the volume, size and scope makes it difficult to regulate and implement compliance.
The rules between securities and forex/commodities are very different in that the main purpose of insider trading laws are to protect the banks from each other and then the consumer.
In forex and the commodity Markets there are plenty of people with insider information but this is unlikely that a single bank will have this information all to themselves. Therefore this makes insider trading laws so much weaker for commodities and pretty much non-existent for forex. There are of course several governmental and independent bodies which supervise foreign exchange trading around the world but no single and centralized body governing the foreign exchange or currency trading markets. The global supervisory bodies regulate forex by setting compliance standards which all brokers under their jurisdiction must adhere to. These compliance standards include being registered and licensed with the regulatory body, those companies then undertake routine and periodic audits. Sending regular updates and communicating changes of broker service to their clients. This does go some way to give reassurance that currency trading is ethical and fair for all involved.
Forex Markets short video:
In summary, we can say that Insider Trading and Insider information sharing are regular everyday events in all markets, some legal, some dubious, some totally immoral and illegal.
Hope you enjoyed the post and hope you develop a Kraken Forex Strategy to help your trading gain an edge which is ≥ insider trading and information!