Insider
trading refers to a malpractice where in the trade of a company's securities
is undertaken by people or executives by the virtue of their work have access
to otherwise non public information. This information plays an important role
making imperative investment and strategic decisions.
In insider tra#ing the term insider
refers to they key employes or the executive of a company or enterprise which
have the access to strategic information and data by the virtue of their work.
They use this information to trade in the company's stocks and securities. Insider trading as said in the beginning is a
malpractice and is highly discouraged by the authorities that aim at
establishing and protecting fair trade of stocks and securities.
What makes it an unfair or illegal practice
is the fact that other investors and stake holders are at a great disadvantage
as they do not have access to the imperative and crucial non public information
that would help in making informed decisions. However in some instances this
strategic information is made public in such a way that all the concerned
investors and stock holders will have proper access to it and can use it to
make strategic informed decisions. In such cases it would not be an illegal
activity or unfair Insider trading of stcocks and securities of a company or
firm.
However in most of the cases the
information is never made public and the concerned investors or stock holders
do not have access to this information and hence due to this non public information that the
key employed or the executives have through their network and sources further
ppromotes unfair trade practices which are wrong both ethically and lawfully.
Insider trading is always subject to criticism and discouragement.
PROPRIETARY
TRADING
Proprietary trading is the
process where a company or firm. goes
for direct gain rather than going for commission dollars. A firm resorts to
proprietary trading when it intends to make profits directly from the market
and not from commissions pertaining to ongoing trades.
The firm's when resorting to proprietary
trading assume or believe that they have a vital competitive advantage that
would give them an edge over others enable them to make excess returns from the
market rather than depending upon commission dollars. They bank upon the fact
or presume that they now have the ability and the skills to make gains directly
from the market and it doesn't have to sacrifice its gains by depending on
commission dollars or commission from. ongoing trades.
Both insider trading and proprietary
trading help companies to make crucial and strategic decisions that would
multiply the gains of a firm or a company. Insider trading is however a
malpractice, is illegal and relentlessly discouraged by securities exchange
boards by keeping proper checks on trade practices to promote fair trade.
Proprietary trading on the other hand is neither illegal nor discouraged. Click here: http://www.octafinance.com/
