From: tcmay@got.net (Timothy C. May)
Date: Mon, 3 Jun 1996 14:56:28 +0800
To: cypherpunks@toad.com
Subject: "Insider Non-Trading" (Re: Insider Trading and Inside Information)
Message-ID: <add7aa1b010210045ad9@[205.199.118.202]>
MIME-Version: 1.0
Content-Type: text/plain


At 7:15 PM 6/2/96, Mike Duvos wrote:

>The SEC, in cooperation with the courts, has been gradually
>shifting the definitions of "insider" and "inside information" to
>more all-encompassing ones.
...
>Nowdays "inside information" has been expanded to include
>anything that the general public is not privy to, and "insiders"
>can be almost anyone as well.
...

Indeed, the recent changes to U.S. Code 18503-666, have been dubbed the
"Insider Non-Trading Law."

What, you may ask, is "insider non-trading"?

Just as inside information may affect decisions to engage in a stock trade,
so too can insider information cause a decision _not_ to engage in a stock
trade!

Imagine that Trader Joe was planning to sell Security Dynamics short.
Perhaps with a direct short sale, or purchase of puts, or other variants.
However, he learns from his golfing partner, Jim Bidzos, that RSA Data is
about to be sold to SD for $250 million. Returning from his golf game, he
cancels his short plans. Voila, "insider non-trading."

The SEC tumbled to this some time ago, and now demands that all those who
are insiders, or who are married to insiders, or who are golfing buddies of
insiders register their trading intentions 90 days in advance of any
transaction. (This will increase to 120 days in 1997, and 180 days the
following year.)

This form of "intention escrow" ensures that insider information cannot be
used to cancel trades which were planned and then not pursued.

Key escrow, signature escrow, identity escrow, position escrow, and, now,
intention escrow. Welcome to the Escrow Society.

--Tim May

(P.S. Stu Brownstein, a Bay Area friend of mine, came up with this "insider
non-trading" joke several years ago. He once thought about writing a letter
to the "NYT" pointing out how insider trading laws must also imply insider
non-trading laws, but a Washington friend of his, he claims, told him not
to. "It may give the SEC ideas," he said.)




Boycott "Big Brother Inside" software!
We got computers, we're tapping phone lines, we know that that ain't allowed.
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Licensed Ontologist         | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."