When insider trading happens in the stock market, it’s usually not the exchange that is liable or responsible for doing anything about it.
If traders with inside information were trading in this market, I’d like to know how they came to know the information, and whether those who shared it agreed to abide by an embargo.
If someone who agreed to abide by an embargo directly traded in the market or knowingly shared information with someone who did, I would consider that an ethical breach. If the sharing was unintentional, I wouldn’t consider it a breach of ethics, but I would question that person’s ability to keep secrets of even mild importance in the future.
If insiders learned of the letter’s existence through more tenuous or indirect links, I still think this is a failure of secret-keeping on the part of CAIS and the signatories, but it may be that there is no one person who is directly responsible. Still, we should strive for better secrecy when it matters, and remind everyone of the basics of information-theoretic secret keeping (act exactly as you would if you knew nothing, consider counterfactuals, etc.).
To add on to the point about information-theoretic secret-keeping, if Manifold, market participants, and people with secrets want to not leak info in the future, my advice for each group is:
Manifold: as a blanket policy, never delete markets, at least for any reason that is causally related to the topic or question of the market. Even taking a market down quietly or on some unrelated pretext reveals a bunch of information to careful observers, and might result in a Streisand effect that causes the info to reach even non-careful observers.
Market participants: abide by embargoes that you have agreed to abide by. If you have not agreed to keep a secret or abide by an embargo, but learn some privileged information via a friend or acquaintance or other means, you may be ethically in the clear to trade on that information. But consider the reputational consequences that your source might suffer, and your future relationship with them, before exploiting their trust in you or their carelessness for manabucks.
Would-be secret-keepers: Glomarize, even when you don’t actually have secrets to keep. In particular, if you regularly create or participate in Manifold markets, you should not necessarily stop doing so when actually keeping a secret. If you did, people could exploit you by asking you to create or participate in markets, and note which requests you oblige and which requests you turn down. Either make (possibly known-losing) trades that you would have made if you knew nothing, or recuse yourself from all markets on which you might in principle have insider information about, and / or recuse yourself randomly. If you expect to have important secrets to keep (or if you don’t, but want to meta-glomarize), it might be better to institute a blanket policy now of not trading in or creating prediction markets at all.
Agree with the first two, and with the risk brought up in third point but not the conclusion of ‘avoid participating’. What about participating only in an inconsistent way, and responding to all requests that you create/participate in prediction markets with the response that acceding to such requests is against personal policy. That gives you the freedom to participate as you desire, but protects you from info-leaking via antagonistic request probing. Also, consider having an anonymous persona for participating in markets that seem like they might tempt you into revealing secrets you don’t reflectively wish to reveal in that way.
Yeah, there are probably various methods you can use and precautions you can take to participate securely without leaking any significant information. But any such plans are necessarily more complicated and carry more risk of screwing them up than blanket abstention. As the importance of the secrets you have to keep goes up, the benefit of simplicity probably outweighs the benefits derived from participating in prediction markets, especially play money ones.
Where someone personally draws the line on whether to participate or not depends on: the relative value they place on keeping secrets, how many important secrets they have, how much benefit they derive from participating in prediction markets, and how much they enjoy implementing complicated information-theoretic secret-keeping schemes.
These are fairly general, and pretty easy to agree with, ignoring any conflicts of intention (a participant might WANT to leak information or make money, even if there’s an embargo).
Note that #2 and #3 are contradictory. One cannot simultaneously abstain from a question AND participate randomly. More important, in a well-functioning market, making incorrect bets actually costs you—this is an expense to maintain secrecy, and a pretty big and painful one, especially for participants who otherwise love that information markets … provide information.
It’s extremely difficult to create a fraudulent company and get it listed on the NYSE. Additionally, the Exchange can and does stop trading on both individual stocks and the exchange as a whole, though due to the downstream effects on consumer confidence this is only done rarely.
I don’t know what lessons one should learn from the stock market regarding MM, but I don’t think we should rush to conclude MM shouldn’t intervene or shouldn’t be blamed for not intervening.
When insider trading happens in the stock market, it’s usually not the exchange that is liable or responsible for doing anything about it.
If traders with inside information were trading in this market, I’d like to know how they came to know the information, and whether those who shared it agreed to abide by an embargo.
If someone who agreed to abide by an embargo directly traded in the market or knowingly shared information with someone who did, I would consider that an ethical breach. If the sharing was unintentional, I wouldn’t consider it a breach of ethics, but I would question that person’s ability to keep secrets of even mild importance in the future.
If insiders learned of the letter’s existence through more tenuous or indirect links, I still think this is a failure of secret-keeping on the part of CAIS and the signatories, but it may be that there is no one person who is directly responsible. Still, we should strive for better secrecy when it matters, and remind everyone of the basics of information-theoretic secret keeping (act exactly as you would if you knew nothing, consider counterfactuals, etc.).
To add on to the point about information-theoretic secret-keeping, if Manifold, market participants, and people with secrets want to not leak info in the future, my advice for each group is:
Manifold: as a blanket policy, never delete markets, at least for any reason that is causally related to the topic or question of the market. Even taking a market down quietly or on some unrelated pretext reveals a bunch of information to careful observers, and might result in a Streisand effect that causes the info to reach even non-careful observers.
Market participants: abide by embargoes that you have agreed to abide by. If you have not agreed to keep a secret or abide by an embargo, but learn some privileged information via a friend or acquaintance or other means, you may be ethically in the clear to trade on that information. But consider the reputational consequences that your source might suffer, and your future relationship with them, before exploiting their trust in you or their carelessness for manabucks.
Would-be secret-keepers: Glomarize, even when you don’t actually have secrets to keep. In particular, if you regularly create or participate in Manifold markets, you should not necessarily stop doing so when actually keeping a secret. If you did, people could exploit you by asking you to create or participate in markets, and note which requests you oblige and which requests you turn down. Either make (possibly known-losing) trades that you would have made if you knew nothing, or recuse yourself from all markets on which you might in principle have insider information about, and / or recuse yourself randomly. If you expect to have important secrets to keep (or if you don’t, but want to meta-glomarize), it might be better to institute a blanket policy now of not trading in or creating prediction markets at all.
Agree with the first two, and with the risk brought up in third point but not the conclusion of ‘avoid participating’. What about participating only in an inconsistent way, and responding to all requests that you create/participate in prediction markets with the response that acceding to such requests is against personal policy. That gives you the freedom to participate as you desire, but protects you from info-leaking via antagonistic request probing. Also, consider having an anonymous persona for participating in markets that seem like they might tempt you into revealing secrets you don’t reflectively wish to reveal in that way.
Yeah, there are probably various methods you can use and precautions you can take to participate securely without leaking any significant information. But any such plans are necessarily more complicated and carry more risk of screwing them up than blanket abstention. As the importance of the secrets you have to keep goes up, the benefit of simplicity probably outweighs the benefits derived from participating in prediction markets, especially play money ones.
Where someone personally draws the line on whether to participate or not depends on: the relative value they place on keeping secrets, how many important secrets they have, how much benefit they derive from participating in prediction markets, and how much they enjoy implementing complicated information-theoretic secret-keeping schemes.
These are fairly general, and pretty easy to agree with, ignoring any conflicts of intention (a participant might WANT to leak information or make money, even if there’s an embargo).
Note that #2 and #3 are contradictory. One cannot simultaneously abstain from a question AND participate randomly. More important, in a well-functioning market, making incorrect bets actually costs you—this is an expense to maintain secrecy, and a pretty big and painful one, especially for participants who otherwise love that information markets … provide information.
It’s extremely difficult to create a fraudulent company and get it listed on the NYSE. Additionally, the Exchange can and does stop trading on both individual stocks and the exchange as a whole, though due to the downstream effects on consumer confidence this is only done rarely.
I don’t know what lessons one should learn from the stock market regarding MM, but I don’t think we should rush to conclude MM shouldn’t intervene or shouldn’t be blamed for not intervening.
Agreed, most “fraudulent” listed public companies (on places like the NYSE, where they actually check stuff), fill weird conditions like:
being really old, to where their corporate history stretches back before modern high-standards checks.
being acquired/SPAC’d to allow a fraudulent private company to kinda list itself.
be based on a larger fraud that probably isn’t accounting/insider related.
(Disclaimer: not an expert, not financial advice.)