InsiderTrading: Should it be legalized or remain illegal? It is important first and foremost to define the term insidertrading. Insidertrading is the trade of a corporation's stock or other securities likes bonds or stock options based on material information (information which would be likely to affect a stock's price or might influence investor's decisions) that is not available to the general public. It is prohibited in the United States by the Securities and Exchange Commission (SEC) because it is seen as unfair and because it apparently destroys investor confidence. The 1976 recipient of the Nobel Memorial Prize in Economic Science, Milton Friedman (1912-2006) believed that insidertrading should be legal and that we "want more insidertrading, not less". He once said, "You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public aware of that".
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Les raisons de la légitimation du délit d'initié
Why should insider trading be legalized?
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[...] Although I can easily understand why some people want to keep insider trading illegal (saying that using the asymmetry of information or unequal access to information in order to make a profit is anti-market and anti ethical), I think that the legalization of insider trading could have prevented scandals such as Enron. Had it been legal, people would have known what was happening in these companies and they would have traded the information on the market (in exchange of money). As a result, the stock market would have reflected the problems earlier than it really did and less people would have been in trouble. [...]
[...] In conclusion, I think that legal insider trading would be positive for the stock market. It would reduce the speculative aspect of the market, thus improving the market's efficiency. The prices of the shares would reflect the correct level of price according to the available information. The market would also be less volatile. Serious, knowledgeable investors would be in control and inexperienced free riders and noise traders (?'idiot traders'') would have very little influence over the market. Furthermore, legalized insider trading would lead to high transparency in the company's innovations, products and shares on the market because the information about their financial situation and their efficiency would be available to the general public. [...]
[...] I support Milton Friedman's statement and agree that insider trading should be legal. This practice should be legalized because, first of all, insider trading produces the right type of rewards and compensation for proposing new ideas and for taking risks because it relates to information about specific things in the corporation, such as innovations on a product, a new manufacturing process or the opening of a new market. Second of all, I think that knowledge is power. Knowing where and when to buy gives you an advantage over other people in the market. [...]