Insider Trading

insider trading is the trading (buying or selling) of shares in a company by an insider - i.e. a senior manager, director, or person who owns more than 10% of the shares of a company. insider trading is not illegal. But, if insiders trade on material privileged information - before it becomes known to the general public - that is a problem! This is perfectly legal except when trading takes place using privileged information which has not yet been released to the public. We often hear of insiders selling stock if they know that a weak earnings report is about to be issued. All insiders must report their trading regularly to the appropriate securities commission. This information is available on-line to the public. If you are about to invest in a company, you might want to find out if insiders are buying or selling. It may give you an indication of their own confidence level in the company.

Similar financial terms

An officer or director of a company, anyone who owns more than 10 percent of a corporation's voting stock and his or her immediate family members, or anyone who has information about a company that is not available to other investors.

Trading Halt
The temporary suspension of trading in a quoted security, usually for 30 minutes, while material news from the issuer is being disseminated over the news wires. A trading halt gives all investors equal opportunity to evaluate news and make buy, sell, or hold decisions on that basis. A trading halt may also be imposed for purely regulatory reasons, either by the SEC, the FSA, any index or other regulatory body.

Refers to trading in securities were positions are opened and closed on the same day.

Trading range
The difference between the high and low prices traded during a period of time; with commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading.

Trading posts
The posts on the floor of a stock exchange where the specialists stand and securities are traded.

Trading paper
CDs purchased by accounts that are likely to resell them. The term is commonly used in the Euromarket.

Trading costs
Costs of buying and selling marketable securities and borrowing. Trading costs include commissions, slippage, and the bid/ask spread. See: transaction costs.

Program trading
Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically.

Last trading day
The final day under an exchange's rules during which trading may take place in a particular futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery of underlying physical commodities or financial instruments, or by agreement for monetary settlement depending upon futures contract specifications.

The Commodity Futures Trading Commission (CFTC)
The Commodity Futures Trading Commission is the federal agency created by Congress to regulate futures trading. The Commodity Exchange Act of 1974 became effective April 21, 1975. Previously, futures trading had been regulated by the Commodity Exchange Authority of the USDA.

Separate Trading of Registered Interest (STRIPS)
Separate Trading of Registered Interest and Principal Securities (STRIPS) are securities that have their periodic interest payments separated from the final maturity payment and the two cash flows are sold to different investors.

Fictitious Trading
Wash trading, bucketing, cross trading, or other schemes which give the appearance of trading. Actually, no bona fide, competitive trade has occurred.

Volatility Quote Trading
Refers to the quoting of bids and offers on option contracts in terms of their implied volatilities rather than as prices.

Ginzy Trading
A trade practice in which a floor broker, in executing an order -- particularly a large order -- will fill a portion of the order at one price and the remainder of the order at another price to avoid an exchange's rule against trading at fractional increments or "split ticks." In In re Murphy, [1984-86 Transfer Binder] Comm. Fut L. Rep. (CCH) at pp. 31,353-4 (Sept. 25, 1985), the Commission found that ginzy trading was a noncompetitive trading practice in violation of section 4c(a)(B) of the Com ...

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Simple moving average

The mean, calculated at any time over a past period of fixed length.

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