The Only Way To Stop Illegal Insider Trading Is To Make Insider Trading Legal, Says Top Investor

But then again, he would say that

The founder of Interactive Brokers Group, Thomas Peterffy, is making the ‘bad guys with guns’ argument, but for insider trading, suggesting the only way to combat it is to make it legal.

“I’m in favor of not having any rules against insider trading. I would like all the information out there as soon as it’s available,” Peterffy said on Bloomberg’s Odd Lots podcast. “Because look, as a society, we are better off knowing as soon as possible anything that is knowable.”

Are we though? And is this just all an advertisement?

The answer is yes (I’ll let you pick the question). You see, Peterffy (which is how someone called Peter introduces themselves when they’re also trying to spit out a fly they’ve just accidentally swallowed) happens to own a prediction market called ForecastEx. 

Prediction markets essentially rely on insider information in order to make more accurate bets and have more people gamble on events. In practice, however, it means that some people have an unfair advantage and end up making a lot of money from real-world events that maybe they shouldn’t.

Insider Trading? I hardly know her!  

The issue seems to be on the rise with a large bet on Maduro’s capture, the Iran war, and whether the price of eggs will go up (there’s a mole at Big Egg, I just know it).

But Peterffffttty (sorry, fly), seems to think that the problem isn’t the insideyness of it, it’s that we pretend that isn’t going on all the time anyway.

Imagine two companies are about to merge. The employees who are in the know can now profit off that information, “the secretaries, the lawyers, everybody knows about it. They go home, they tell their wives, their husbands. So it eventually always filters out.”

But Peter(ffy) suggests that prediction markets and legalising the practice would even the playing field. “Why don’t we just do away with it and let the information come out as soon as possible?” This way, the “sharks” can’t profit because that information isn’t special, and in theory, everyone gets a fair shake.

And it seems that Pete’s crusade might have personal stakes, considering that he lost out to insider traders in the 70s. “I was really traumatized. I lost $90,000 and it was horrible,” he said. But does he react to this trauma by seeking revenge? By wanting to ban all insider trading? No, P-Dog says, kill ‘em with kindness.

“But I still say to you that I think the best thing we could do about inside information is just to get the news out there as fast as possible and forget about persecuting people.”

Well, well, well. It seems that the insider has become the insidee.