Transcripts

"Two Ways to Play" -Kevin Depew of Minyanville

SUSIE GHARIB: With the Galleon hedge fund case making headlines, tonight's "Two Ways to Play" asks the question: is insider trading all bad? Here's Kevin Depew of Minyanville and Minyanville's Kevin Depew with some answers.

KEVIN DEPEW, EXECUTIVE EDITOR, MINYANVILLE.COM: Last week Federal prosecutors and the SEC charged the founder of a $7 billion hedge fund with insider trading in the stocks of several companies, including Advanced Micro Devices and Google. It's a high-profile case for the SEC but raises a longstanding question. When it comes to fighting insider trading, is the agency just a toothless cougar? The SEC has just 1100 people responsible for enforcing violations among this country's more than 12,000 publicly traded companies and almost $44 trillion worth of trading each year. It's an impossible task. So in that case, why not just legalize insider trading? Actually, that's not the most outrageous thing you've ever suggested. Nobel prize-winning economist Milton Friedman said, you want more insider trading, not less, because it gives people with knowledge about the deficiencies of a company an incentive to make the public aware of it. Another argument is that price discovery in the markets will occur faster if insider trading is legal. Perhaps. But there's another, higher cost. If the public thinks the market is an insiders' game, then liquidity will dry up and dislocations will become more frequent. Following on the heels of the banking crisis, the perception of a rigged market is the last thing we need.