I don’t really get it. Wouldn’t you want to buy and trade your own company’s stocks? Why is it illegal? Am I just not understanding what insider trading actually is?
In: Economics
Insider Trading is illegal because it make uses of information the public doesn’t know.
one of the core aspects that makes the Stock market ” Fair” is that all players are operating on public knowledge about the companies hence everyone is working off the same base and any edge you can get should be coming from your ability to read how a market is progressing and making your educated guess based off this info.
this is where insider Trading is a problem, if you got privileged information that the public is not supposed to know you can get ahead of the market and potentially make a lot of money…**at the expense of everyone else that is participating in this market**, this is VERY illegal as it completely undermines trust in the Stock market and makes it pointless.
Most companies do allow their employees to buy their own stock(they generally even put aside a % of the stock for this purpose alone), but they also must enforce rules that prevent them from accidentally or not would let them act based on insider knowledge(ie not allowing transactions during sensitive periods and enforcing NDA’s to prevent insider trading in the 3rd person.)
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