Matt Levine, Columnist

Another Politician Wants to Ban Insider Trading

Is insider trading law about fairness, or about theft?

April 1, 2015 at 10:15 AM UTC

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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Why is insider trading illegal? I think there are two main theories:

The first theory is far more popular but obviously wrong. Honestly you should only trade if you have information that everybody else doesn't have. The (social) point of trading is to get information incorporated into market prices. If you have no information to incorporate into the price, you're not doing anyone any favors by trading. Least of all yourself: If you only have the same information as everyone else, how are you going to make any money? Just index.