A fairly well-respected magazine is admitting the truth of a major long-running conspiracy theory that affects hundreds of millions of people. The article is backed by recent research. This is one of those “duh, of course” conspiracies, but it has always been denied by important persons and authorities.
One study suggests insiders profited even from the global financial crisis; another that the whole share-trading system is rigged
INSIDER-TRADING prosecutions have netted plenty of small fry. But many grumble that the big fish swim off unharmed. That nagging fear has some new academic backing, from three studies. One argues that well-connected insiders profited even from the financial crisis.* The others go further still, suggesting the entire share-trading system is rigged.**
What is known about insider trading tends to come from prosecutions. But these require fortuitous tip-offs and extensive, expensive investigations, involving the examination of complex evidence from phone calls, e-mails or informants wired with recorders. The resulting haze of numbers may befuddle a jury unless they are leavened with a few spicy details—exotic code words, say, or (even better) suitcases filled with cash.
The papers make imaginative use of pattern analysis from data to find that insider trading is probably pervasive. The approach reflects a new way of analysing conduct in the financial markets. It also raises questions about how to treat behaviour if it is systemic rather than limited to the occasional rogue trader.
The first paper starts from the private meetings American government officials held during the crisis with financial institutions. Not made public at the time were critical details about what came to be called the Troubled Asset Relief Programme (TARP), notably how much money would be involved and how it would be allocated. This mattered hugely. The very survival of some institutions was at stake; in the end, hundreds of billions of dollars were pledged. Knowing the structure and scope of the bail-out in advance would have been a vitally important piece of information for investors during this period.