2013-24 Insider trading 2.0

What is insider trading? It is trading on information that is not publicly available.
Does it matter how the information was obtained? Probably not very much for the trader, but I am not a lawyer.
But it matters for the provider of the information. How about someone selling the information for a profit?
Well, it turns out that things are more complicated that one may think. Here is the story
and here is the explanation from a law professor
The story: University of Michigan conducts a survey of consumer sentiment. The results of the survey provide important information to market participants and move share prices.
The UofMichigan provides the study to Thompson Reuters, which sells it to a select group a couple of seconds before making the information public.
The institutions that get an early peak at the data are the so-called high-frequency traders. They have powerful computers, and sophisticated computer programs, which allow them to make trades within milliseconds of receiving information. So the 2 seconds advance information is sufficient for them to make trades before the general market learns the results of the survey.

In a nutshell, the law professor says that an institution that holds information obtained through research can do with it as it pleases. It may be unfair to sell early access to information, but it is not illegal. Companies must release information about themselves simultaneously to everyone. But the survey information is not about Thompson Reuters.

Below is some legal info from Professor Henning:

"Although it is natural to think that having access to information that influences the markets before others is always wrong, the laws on fraud do not go that far. Instead, they focus on whether someone has been deceived, either through a misstatement or by a failure to disclose information [...] the core of any violation is still about proving fraud, which includes not just false statements but also any “deception, concealment, suppression, false pretense or fictitious or pretended purchase or sale” of securities.[...]
Thomson Reuters and others who selectively disclose information to subscribers are not hiding what they do. Indeed, it is the exact opposite — they tell the world that only those willing to pay will get the advantage of an early peek at the information."

And so it is all legal but unfair.