I have worked on equities platforms in the US and Europe. I consider both arguments given early in the piece to be convincing defences of insider trading bans.<p>1. "insider trading argue [..] violates the principle of equal opportunity because actors are trading on information available only to them". This is true - it does undermine the principle of equal opportunity. The argument the author makes later about hedge funds is not relevant to this, because they are building their conclusions from a foundation of public information.<p>2. "[insider trading] creates inefficiencies by discouraging investment". It does. The equities market only exists because of the combination of the heavy regulation that creates it, and the public that chooses to invest in it. The equities market will only retain public confidence while people have high confidence in the utility value of the system. This is an ongoing project, akin to regularly painting a house to protect the walls. Allowing insider trading would undermine that project, because it would rightfully strengthen the perception that there was one standard for insiders and another for outsiders.<p>I will present two further arguments.<p>3. Work related to employment should focus on service to the company. If people are trading on the back of information they access through employment, that creates mixed incentives.<p>4. Laws around equities trading are structured to service the principle of do-the-right-thing. This includes bans on front-running, rules about not loading up the book to communicate false interest. The ban on insider trading fits naturally into the ethos of the larger set of rules. It would be weird to create an exception for that alone.<p>The post does give an interesting picture of a world without insider trading.<p>a. More efficient price-discovery. This is true.<p>b. Non-government mechanisms where firms prevent insider trading. A firm could build a reputation for being good at this, and distinguish themselves against the market.<p>The second point is true, but it creates a more complicated market structure, because pricing of equities would need to consider how individual companies enforce the behaviour of their staff. Perhaps this would evolve into an industry standard akin to SOC 2 Type 2. Yuck! It is simpler and more efficient to have the regulator outlaw insider trading.<p>Most markets emerge organically. Food stalls, shoe shops, commodities, foreign exchange. But this is not true of the equities market.<p>The equities market as we currently think of it is a product of heavy government regulation, and would not exist without it. There is no such thing as a big equities market without heavy regulation. If you tried to build such a thing, that thing would not win public confidence. If they changed an existing system, liquidity would flow away to other jurisdictions. The importance of public confidence motivated Hong Kong and France [1] to create insider trading bans. The dynamics of insider trading and public confidence are a reason to be dubious about the prospects of some proposals for blockchain-based securities.<p>:1 see p46/47 <a href="https://repository.law.miami.edu/cgi/viewcontent.cgi?article=1503&context=umialr" rel="nofollow">https://repository.law.miami.edu/cgi/viewcontent.cgi?article...</a>