Insider trading

Abstract

1 8 June, 1815 - Napoleon is defeated. The Rothschilds, who had advance warning of Wellington's victory via carrier pigeons, plot and execute what is to become a legendary killing on The London Stock Exchange. The spreading of rumours of an English defeat ensures the Rothschilds acquire a mass of stock at prices dictated by panic. The Rothschilds then off-1 oad, making massive profits, when the good news is finally disseminated. So goes the story. Though often cited as 'the' insider information case par excel lance, this is not a case of insider trading in terms of the meaning attributed to the concept for the purposes of this paper. It can more aptly be described, purely and simply, as a market fraud. The concept of insider trading as understood today does not require the use of inside information for the purposes of deception. The term 1 insider trading' is generally taken to mean the use by corporate insiders, and by those who obtain such information from them, of unpublished confidential price-sensitive information that they have obtained by virtue of their position, to make a profit or to avoid a loss by dealing in the securities of a relevant company.