Wall Street Cheats: Study Reveals Insiders Use ETFs To Conceal Trading Ahead Of M&A Announcements
Posted by freedomforall 1 year, 2 months ago to Business
Excerpt:
"A new study published on the Social Science Research Network (SSRN) reveals that exchange-traded funds (ETFs) are a "new form" of insider trading for those in the 'know' about upcoming merger and acquisition deals. The reason is that the ETF conceals their trading and is harder to track because the fund owns a basket of other stocks. Insiders, who trade on non-public information, are pivoting from single stock bets ahead of announcements because securities agencies can easily flag trading activity.
The paper is titled "Using ETFs to Conceal Insider Trading" and explains:
Our evidence suggests that some traders in possession of material non-public information about upcoming M&A announcements trade in ETFs that contain the target stock, rather than trading the underlying company shares, thereby concealing their insider trading. "
"A new study published on the Social Science Research Network (SSRN) reveals that exchange-traded funds (ETFs) are a "new form" of insider trading for those in the 'know' about upcoming merger and acquisition deals. The reason is that the ETF conceals their trading and is harder to track because the fund owns a basket of other stocks. Insiders, who trade on non-public information, are pivoting from single stock bets ahead of announcements because securities agencies can easily flag trading activity.
The paper is titled "Using ETFs to Conceal Insider Trading" and explains:
Our evidence suggests that some traders in possession of material non-public information about upcoming M&A announcements trade in ETFs that contain the target stock, rather than trading the underlying company shares, thereby concealing their insider trading. "
This is why these "alternative" investments (which don't amount to actual partial ownership in a company) should be avoided by investors entirely and probably banned by government.