[HN Gopher] The Eddie Murphy rule and information embargoes
___________________________________________________________________
The Eddie Murphy rule and information embargoes
Author : thunderbong
Score : 70 points
Date : 2023-09-13 16:19 UTC (6 hours ago)
(HTM) web link (econlife.com)
(TXT) w3m dump (econlife.com)
| alberth wrote:
| It's amazing to think that Eddie Murphy was only:
|
| - 20 years old in 48-Hours
|
| - 21 years old in Trading Places
|
| - 22 years old in Beverly Hills Cop
|
| And only 19 years old on SNL and hugely famous.
| Mizoguchi wrote:
| Reminds me of Ep 123 of Darknet Diaries.
| chollida1 wrote:
| > (They followed the basic prototype for selling short. That just
| means you sell high before you buy low. How? First you borrow and
| sell. Then you wait for markets to drop, buy, and return what you
| borrowed.)
|
| Minor nitpick here, but with futures you aren't shorting in that
| you never borrow. You are simply writing a futures contract which
| makes you the seller. So when you write the contract you are
| obligated to sell/deliver at that price on the futures delivery
| date.
|
| this is a bit different from options in that a futures contract
| buyer has to take delivery and the seller has to deliver. Where
| as for an options contract the buyer has the right but not the
| obligation to exercise it.
|
| You then cancel your obligation out by later buying a contract
| that obligates you to take delivery on the delivery date. In this
| case since you bought the contract later when the market crashed
| you are buying delivery at a lower price, thus fulfilling your
| delivery obligations and locking in a profit.
|
| No shorting or borrowing happens in this instance.
|
| A few random fun facts about futures.
|
| 1) there aren't insider trading rules like there are for
| equities. This makes sense when you consider that McDonalds can
| move the market if they chose to create a new product. Not
| allowing McDonalds to trade in the futures market would mean they
| can't hedge their input needs.
|
| Similarly oil companies use futures to hedge their selling prices
| for oil. If you had insider trading laws like we do with equities
| they couldn't trade as they have insider knowledge of their
| market moving needs.
|
| 2) A few years ago oil traded negatively for a month, this meant
| you actually got paid to take delivery of oil. This happened not
| because oil was worthless( it was still worth the market rate)
| but because you need to take delivery of the oil on the delivery
| date.
|
| And oil can't just be stored in the your garage. You need to have
| pre arrange storage in Cushing, Oklahoma or arrange for a rail
| car to ship your oil out on that exact date.
|
| As you would expect oil storage being heavily regulated is finite
| and rail cars are expensive and booked months in advance so once
| the storage and rail delivery options were full you'd have to pay
| someone else for their prearranged storage or rail delivery.
|
| And the holders of these storage and shipping options were able
| to charge a ransom for them as contract buyers had to take
| delivery and thus had to arrange storage or shipping. More than a
| few retail investors got hosed on this buy buying futures when
| the price dropped to half of what a barrel was worth not fully
| realizing that a) they'd need to pay for storage and b) not fully
| realizing that the price of oil didn't have a floor at zero, it
| could infact go negative.
| RichardCA wrote:
| It's not a minor nitpick. The author mis-explains what futures
| contracts are in a very fundamental way.
|
| There's an NPR article about this same topic:
| https://www.npr.org/sections/money/2013/07/19/201430727/what...
|
| "Winthorpe and Valentine have contracts allowing them to buy
| millions of pounds of orange juice in April for 29 cents a
| pound, and to sell it for $1.42 a pound. They sold high and
| bought low. They're rich. The Dukes made the opposite bet and
| went broke."
| stonemetal12 wrote:
| When you say "there aren't insider trading rules like there are
| for equities" Do you mean there aren't any at all or that they
| are different?
|
| I could see there being different rules like "primary" players
| are allowed but "secondary" players aren't allowed. That way
| McDonalds could buy pork futures before the McRib comes back,
| but the CEO can't use insider info to front run pork futures
| before the McRib comes back.
| JumpCrisscross wrote:
| > _When you say "there aren't insider trading rules like
| there are for equities" Do you mean there aren't any at all
| or that they are different?_
|
| Closer to non-existent. Same for foreign exchange.
|
| > _different rules like "primary" players are allowed but
| "secondary" players aren't allowed_
|
| Trying to delineate markets this way is how Enron became a
| quasi hedge fund while many banks busy themselves running
| warehouses. One set of rules is simpler and more efficient,
| particularly for something as utilitarian as commodities,
| where you're concerned with efficiency more than fairness.
|
| > _the CEO can 't use insider info to front run pork futures
| before the McRib comes back_
|
| I don't think there would be a commodities violation in this.
| There _could_ be a securities violation, in that the CEO is
| misappropriating gains that belong to the shareholders they
| have a fiduciary obligation to.
| petercooper wrote:
| I've read books about high frequency trading and the like, but
| what is the mechanism by which information from an audio feed "a
| few seconds" in advance of another is turned into profitable
| trades? Is a human involved? If so, do they prepare trades to
| suit both directions and then hit the right button as soon as
| they hear the right thing on the feed?
| steveklabnik wrote:
| Here is an article about the events mentioned, that has some
| more detail:
| https://www.ft.com/content/17bc0ef6-2282-11ea-92da-f0c92e957...
|
| > up to 10 seconds before live comments were broadcast on
| television or internet streams
|
| Ten seconds is a long enough time for your "if so," which is
| what I would guess happens in this specific circumstance.
|
| I am an amateur in this space, but in general there are a lot
| of misconceptions about HFT, because the details are highly
| technical. See the debates over "paying for order flow," for
| example. I think it's hard to characterize these systems
| because, well, they are proprietary. In my understanding, most
| HFT folks rely on a combination of fundamental and technical
| analysis, more than sentiment analysis. HFT is more of a game
| of "make a small amount of money trading all the time" than
| "wait until some news breaks and reacts to it."
| AndrewKemendo wrote:
| There's one thing that's a guarantee in life:
|
| As long as it keeps the rich getting richer it will be
| implemented and become the law
| justin66 wrote:
| Dan Aykroyd does not get the respect he deserves and the title of
| this article is just one example.
| steveklabnik wrote:
| The title comes from the name of the rule. The rule is named
| after Eddie because his character is the one that came up with
| the idea.
|
| I agree Dan is fantastic but I think the rule is correctly
| named.
| jedberg wrote:
| Actually it was Jamie Lee Curtis who comes up with the idea,
| and Dan who explains the logistics of how it will work.
| steveklabnik wrote:
| I do think this is debatable, but we find Dan, readying a
| shotgun, saying "well do you have any better ideas?" and
| Eddie says "the best way you hurt rich people is by turning
| them into poor people."
|
| It is true that Jamie Lee then sees the news about the
| report, and they all kind of have a collective realization
| about it. I think it can be argued that they all played a
| role, but if you have to pick someone, I'd argue that
| Eddie's line is the beginning of the idea.
|
| Actually, reflecting on it further, I think that if this
| were real life, I would personally give them all credit,
| but it being a movie, I give Eddie's character the most, if
| not all, the credit.
| sumtechguy wrote:
| 'or beats them to it'
|
| Basically they got the report before the dukes and
| changed it.
|
| Louis showed the need to get back at them. Billy showed
| the way to properly get back at them with no possible
| actionable item. Ophelia showed what the dukes were doing
| and a possible thing to get at them with. Coleman showed
| that they need to get that report first and find out
| which way it went.
|
| They all played a part. They all even helped finance it.
|
| It was a very nicely written piece with each character
| playing in character to help solve the problem proposed
| by the main character.
| SoftTalker wrote:
| But where is Beakes?
| steveklabnik wrote:
| > It was a very nicely written piece with each character
| playing in character to help solve the problem proposed
| by the main character.
|
| I fully agree with this, which is why because it's a
| movie, it being attributed mostly to the main character
| makes sense, but if it weren't, I'd think they all played
| a part.
|
| Anyway my opinion on this is 100% irrelevant so I'm going
| to leave it at that. I think it's a great movie, all in
| all.
| jedberg wrote:
| I honestly think OP is right, it's just called that
| because Eddie was the most famous person in the movie at
| the time as his career was on fire, and he's most closely
| associated with it. The movie doesn't really show whose
| idea it was.
|
| But now you got me thinking about another question -- who
| actually delivered the crop report to the USDA? Beeks was
| locked in the cage, so someone had to actually deliver
| the real report. Who did that?
| sumtechguy wrote:
| I believe He had a copy. He was paid by the dukes to get
| a copy before anyone else saw it?
| jedberg wrote:
| No he was carrying the briefcase with the handcuffs
| because it was the real report and he was on his way to
| DC to deliver it.
| steveklabnik wrote:
| I could believe that; I was born three years after the
| film came out, so I am less familiar with that sort of
| context.
|
| I haven't seen it in a while, but Wikipedia's plot
| summary says:
|
| > The group deliver the forged report to the Dukes in
| Beeks' place.
|
| I think they like meet him in a parking lot and it's dark
| so they can't tell it's not him?
|
| Maybe this is a good excuse to watch the movie again
| sometime soon.
| jedberg wrote:
| Right, they pretend to be Beeks to deliver their fake
| copy of the report to the Dukes. But that still leaves
| the question of who delivered the real copy to the USDA,
| which they read live on the air, and which they were
| expecting to be delivered by Beeks.
| steveklabnik wrote:
| Ah, fair. A good question!
| justin66 wrote:
| > Maybe this is a good excuse to watch the movie again
| sometime soon.
|
| I feel the same way.
|
| I'm happy I managed to provoke such a conversation. If
| because of this, just one person interrupted their work
| so they could stream _Trading Places,_ well... perhaps we
| 've made the world a better place. _Ahem._
|
| edit: and I for some reason feel _delighted_ that my post
| turned into one of those controversial ones that gets
| upvoted and downvoted multiple times for no apparent
| reason. Dan Aykroyd 's greatness _should_ provoke
| controversy. Is he merely great, or _the greatest?_
| aaron695 wrote:
| [dead]
| greenthrow wrote:
| (2019)
| motoboi wrote:
| Information is where Money and Relativity meet.
| cempaka wrote:
| A fun read along these same lines, about the origins of the
| Zimmerman Rule (which says that profits from improperly funded
| trades accrue to the broker): https://chicagoreader.com/news-
| politics/busted-6/
| ksherlock wrote:
| via the August 30th Money Stuff, that sort of thing still
| happens:
|
| "The SEC's complaint alleges that, between July 1 and 6, 2022,
| Anthony opened a new brokerage account using a fraudulent
| application on which he overstated his personal income and then
| made $1 million in bogus deposits from his bank account, which
| held only nine cents at the time. The complaint also states
| that, before Anthony's deposits reversed for insufficient funds
| in his bank account, he used "immediate access" credit extended
| to him by his broker-dealer to purchase $199,956.65 in
| securities. According to the complaint, Anthony's broker-dealer
| discovered the scheme before Anthony could make any profits,
| froze his account, and liquidated his holdings."
|
| https://newsletterhunt.com/emails/37239
|
| https://www.sec.gov/litigation/litreleases/lr-25816
|
| https://www.sec.gov/files/litigation/complaints/2023/comp258...
| underlipton wrote:
| IIRC, the liquidation actually did yield $2k more than he'd
| paid for the securities. _He_ just didn 't profit.
| jakeinspace wrote:
| Seems reasonable. Then again, what happens if someone robs my
| house, takes the cash he finds to the casino, and wins a
| million dollars before getting caught? Knowing how much
| political power casinos have, I wouldn't be surprised if the
| action itself violated their rules and meant they could
| repossess the winnings.
| Terr_ wrote:
| It seems like these attempts to enforce fairness/impartiality
| often hinge on making the information-release as simultaneous as
| possible... But I can't help but feel dissatisfied with that, it
| feels like a cheap-and-dirty fix.
|
| It just shifts things from "free money to whoever has the best
| spy-network or paid preferential access" to "free money to
| whoever builds a system to place orders milliseconds faster than
| others."
| pixl97 wrote:
| It turns out that the speed of light its the limit to causality
| and your 'closeness' to the source is always going to matter.
|
| Lets imagine it on a planetary scale, you have planets in this
| particular layout currently.
|
| A - B - C
|
| If planet A releases news, planet B will get the news and be
| able to reply to it before planet C and there no way to do
| anything about it unless you come up with superluminal travel.
|
| Now, some number of months, years later as the planets orbit
| you can get A - C -B in which planet B would be left out.
| [deleted]
| matthewaveryusa wrote:
| You could try to make it fair by having planet A encrypt a
| payload to B and a payload to C such that the transmission
| time and decryption time from A - B is the same as A - C. You
| could need encryption that feeds the previous block to the
| next (so CBC), and some trusted computing solution such that
| additional compute cannot be added to accelerate the
| decryption.
| pixl97 wrote:
| This depends if you're doing full cycle trips of two way
| 'trading' to planet A.
|
| You not only have the time for full information to get to
| planet C, you have to withhold information from B until
| planet C's reply is already in flight back to planet A.
| Terr_ wrote:
| I think this is more about which activities (ex: industrial
| espionage) _ought to be_ economically rewarded and which
| should not.
|
| It's true that "Being Much Closer On A Closer Planet" might
| _someday_ be part of that debate, but I think we 've got
| plenty of closer non-spacetime issues to tackle first.
| [deleted]
| bagels wrote:
| There is a better kind of closeness, eg. for
| reports/financials, being on the inside and getting the
| information on human timescales (well ahead of the public)
| throw0101b wrote:
| > _It turns out that the speed of light its the limit to
| causality and your 'closeness' to the source is always going
| to matter._
|
| Evidence for this is that in 2012/2013 insider trading was
| detected due to the latency between DC and Chicago:
|
| * https://www.cnbc.com/2013/09/24/some-traders-got-no-taper-
| de...
|
| * https://www.theverge.com/2013/10/3/4798542/whats-faster-
| than...
| Arainach wrote:
| It doesn't have to be for everything. Disclose whenever and
| disallow action on the information for a period of time. This
| is why company earnings are disclosed after the market closes
| for the day - everyone has several hours to receive the
| information and decide what to do.
| underlipton wrote:
| Does that really help, though? During the trading day, many
| (I want to say most, but can't confirm it) trades don't
| affect prices; odd lots and trades internalized on certain
| trading platforms don't effect NBBO IIRC. On the other
| hand, pre-market and after hours trades of even single-
| digit shares can move the price. This is why volatility can
| be so high then, and why you'll often see things like stock
| prices moving 10, 20, 30% within a few moments of close.
| Sometimes it snaps back before the next trading day.
| Sometimes, it doesn't.
| esafak wrote:
| You could mildly quantize the order processing to give
| everybody enough time to act on it, and eliminate a lot of
| unproductive HFT.
| Terr_ wrote:
| Yeah, another possibility might be an exchange where there is
| some time-fuzzing in the system, such as if every order gets
| a (provably) random hidden delay. This would discourage
| people trying to play around incidental timing issues in
| favor of bidding what they "really think is right."
|
| I suppose users might try to avoid that by breaking up a
| buy/sell order into a bazillion tiny orders, but that could
| be curbed by transaction-costs.
| lifeisstillgood wrote:
| The SEC and other regulators try to make markets fair and avoid
| corruption because otherwise people would sensibly stay away, and
| then the money would dry up.
|
| That's how I understand it. And it feels like a leaky dam with
| fingers stuck all over it.
|
| What are the major, huge, "no-one will go for that" changes that
| might simply replace the dam?
|
| If we apply a Tobin Tax? If we time box trades to every five
| minutes? If we end trading on margin? Place derivatives under
| insurance law ?
|
| Or is it that experienced players have a huge incentive to fleece
| inexperienced players and that's just the way of the world, and
| the casino needs to have really good pit bosses, or there is no
| casino?
| JumpCrisscross wrote:
| > _regulators try to make markets fair and avoid corruption
| because otherwise people would sensibly stay away_
|
| Cryptocurrency seems to refute this assumption. I'd be curious
| to see if these fairness regulations actually lower capital
| costs for companies more than they cost to comply with.
| saintkaye wrote:
| This is correct and what's lost in legislation their goal isn't
| to make markets fair, it's instead to make them inviting to
| capital. Though there is some overlap, they are very distinct
| incentives.
| futuretaint wrote:
| thats a great point. its fair in a 'pursuit of happiness'
| type of way.
| batmansmom1 wrote:
| Time box for trades is a very interesting idea that I've never
| heard of before. Would probably equalize the playing field by a
| lot, reducing the advantage firms have simply by being close to
| the market. Have there been serious discussions about this in
| the past? I wonder what the downsides would be, besides that it
| would hurt the bottom line of market makers
| bluGill wrote:
| Warren Buffet has stated the markets should be open only one
| day per year before. I can't find his exact words though.
|
| It would equalize the field. However it also means unexpected
| expenses cannot be handled. Furnace breaks, even though you
| have plenty of $$$ in stocks you are unable to get it fixed.
| (I know a retired person who was forced to buy a new car with
| cash because the bank didn't accept their > $million in
| investments as proof they could pay for a small loan)
| steveklabnik wrote:
| I believe you're slightly mis-remembering; the quote that
| I'm aware of is "Only buy something that you'd be perfectly
| happy to hold if the market shut down for 10 years."
|
| It's a statement about strategy, not about suggesting
| regulation.
| bluGill wrote:
| He has said that type of thing a lot more often. I seem
| to recall the suggestion the market shutdown except for
| once a year as well. As I recall he admitted that it
| wasn't workable.
|
| Or maybe I remember wrong.
| steveklabnik wrote:
| No matter what time box you choose, someone is not going to
| be able to react to information for longer than the time box.
| It introduces complexity for dubious benefit, IMHO.
|
| And yes, this has been talked about endlessly. Heck, some
| people have proposed even further restrictions; for example,
| in practice, the first and last hours that the exchange are
| open tend to have the highest volume, so why not only keep
| the exchange open for those two hours?
| Dylan16807 wrote:
| > No matter what time box you choose, someone is not going
| to be able to react to information for longer than the time
| box. It introduces complexity for dubious benefit, IMHO.
|
| If releases like this were scheduled for 30 seconds into a
| 5 minute box, basically _any_ trader that cares would be
| able to react inside the box. We could say 99.9% for the
| sake of argument.
|
| I can't exactly state whether it's a good idea overall, but
| the idea that it might not catch literally everyone doesn't
| really matter. It's an extreme example of letting the
| perfect be the enemy of the good, when it comes to this
| single aspect.
| bluGill wrote:
| A computer can process your release in 4 minutes. However
| if your release is complex at all a human would not be
| able to figure it out.
| Dylan16807 wrote:
| A computer can process it in 4 seconds, but badly. Given
| 4 minutes I think a human with reasonable tools could do
| as good of a job as a computer.
| steveklabnik wrote:
| I personally tend to believe that the more complexity you
| introduce into systems like this, the more unintended
| consequences and more opportunities for shenanigans
| arise. I don't think that five minute boxes moves the
| needle on societal good via the exchange. I am also not
| an expert.
| JumpCrisscross wrote:
| > _Time box for trades is a very interesting idea_
|
| It's how the market opens every morning and closes every
| afternoon [1]. There is still an advantage to low latency--
| the closer your get your order to the submission deadline,
| the more information you can incorporate into it.
|
| [1] https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Op
| eni...
| smolder wrote:
| Sounds like you're talking about anti-latency arbitrage
| mechanisms, which aren't a new subject. The book Flash Boys
| talked about IEX, an exchange set up in Canada with an enforced
| minimum latency via propagation delay, just by having long
| coils of fiberoptic cable...
|
| I don't think nanosecond-sensitive trading should be a thing,
| personally, but sweeping changes to the way security exchange
| works seems less likely than societal collapse. Most apparent
| experts insist that letting algorithmic money vacuums operate
| is "good for liquidity," and that there is no viable more-fair
| alternative. I don't really buy it. IMO the obstacles to
| something better are just public ignorance, industry inertia,
| and a deeply lacking interest in fairness, i.e. corruption.
| ipaddr wrote:
| What if you disclosed private information on twitter before
| trading. Would that still break the law? "Just heard jelly bean
| futures are going down. Going to sell now"
| gmane wrote:
| Yes, it would break the law because the law is written based on
| how you got the information, not based on if the information is
| disseminated. The law is that you can't use misappropriated
| government information.
| bluGill wrote:
| How long before. There are often rules that you have to
| disclose such data a specific amount of time before you trade -
| often a week or two. There is an exception for trades you
| scheduled far enough in advance that they couldn't have been
| insiders (ie if you want to pay your kids' Harvard tuition you
| can schedule the trade months in advance - you won't have
| insider information anyway)
|
| If everybody expects you to disclose that information in
| twitter than you are okay. However if the information is
| supposed to be disclosed on a SEC form (8k, and 10q are the
| most likely) than putting it on twitter first could get you in
| trouble even if you don't trade at all since someone who
| watches the SEC filings will not see your twitter notice)
| jabroni_salad wrote:
| Yes, since you are using insider information.
|
| And before spitballing further, consider the 'good faith' rule.
| Are you acting on the insider information in good faith? If
| not, do not do that thing.
| cmcaleer wrote:
| Let's make it a bit more interesting and say the Twitter
| account is a paid subscription for $1MM/mo. I was following
| his Twitter account and knew that he seemed to have a good
| instinct for when things were going down, but it can't be
| proven that I knew that the account was disclosing non-public
| government information.
|
| Should I be expected to know that was information improperly
| obtained, particularly because of the massive premium cost of
| the subscription implies that it's possible that something
| improper is going on?
| bluGill wrote:
| Maybe. If a "reasonable person" would figure it was insider
| information then you are in trouble.
| batmansmom1 wrote:
| Seems like there isn't really an issue being raised in this
| article. There clearly needs to be close scrutiny on the
| journalists being given the information in advance, but given the
| fact that its provided in a "lockup room" it seems like that's
| the case. If everyone can access the information at the same
| time, even if its via these journalists, I don't really see an
| issue.
| steveklabnik wrote:
| I don't think the article intends to raise an issue. It simply
| explains various ways that the rule is dealt with. That the
| lockup room exists is exactly for that purpose.
___________________________________________________________________
(page generated 2023-09-13 23:01 UTC)