Insider Trading Essay

721 Words 3 Pages
Introduction to Insider Trading
Insider trading is the act of gaining access to confidential trade information through the stock exchange and using it for a personal advantage. Inside traders essentially know before a company’s stock plummets, and they have the advantage to trade and sell those shares before the rest of the general public does. Insider trading is currently illegal, but there are numerous people who are trying to legalize it. There are two viewpoints of Insider trading: Those who are for it believe insider trading can increase the value of certain stocks and those who are against it believe insider trading disfigures the market system unfairly. In this field research study both views will be evaluated along with evidence of
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Therefore, America is not giving companies the potential earnings they should be getting. The central element of the stock market is the movement of information in conjunction with the trade of money. If citizens were encouraged to seek out nonpublic information, they would essentially be helping the market on channeling current and vital information towards the public. This would contribute to the efficiency of the market and contribute to all participants involved. (Roth, 2014) Finally, insider information can never be proven as legitimate material. In a majority of cases, insider trading doesn’t even work to the individual’s advantage, it’s all an element of chance. A crucial portion of information that an inside trader can never be aware of, is how the material will conclusively affect the stock market. The fact of the matter is that inside trading has no victims, and has the potential to create a greater market with more money. (Roth, …show more content…
First and foremost, unrestricted insider trading could ultimately lead to the destruction of many capital markets. (Dennert, 1991) If insider trading became legal many companies that make up the body of the stock market would potentially withdraw. This is because, whether the information is positive or negative, it still might affect the company negatively and certain businesses can’t afford such a risk. The result of companies taking their money out of stocks could eventually crash the economy. Secondly, insider trading limits the range of access to information that others receive. The fairness principle is imperative within the stock exchange, but more in a sense that all Americans can acquire the information in the same way. Government officials and celebrities should not have favor in the stock exchange just because they are well-acquainted with powerful people. (Dennert, 1991) Therefore, insider trading is completely unjustifiable. There is no way to regulate knowledge, resulting in the fact that someone will always be more informed than another based on Americas hierarchy

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