humongous deals

One thing that people like to say is that insider trading in commodities is just fine. It’s the point, even: the main people – if some politicians had their way, the only people – who trade in commodities are the people growing them, or digging them out of the ground, or whatever one does to make commodities on the one hand,1 and the people eating them or burning them or whatever one does with commodities on the other hand. All hedging real-world activity, no speculation. And if you’re a huge wheat grower, and all your wheat was involved in some sort of unexpected wheat accident, then you will probably want to go buy some wheat in the market (to close out your hedges or satisfy your contracted delivery requirements or bake your bread or whatever). And you’ll probably want to do that before prices go up when people realize that the supply of wheat is lower than expected. And you can do that. That’s fine. That’s hedging, more or less, not insider trading.

But that’s not the whole story. Trading in advance of your own inside information is okay, but trading in advance of someone else’s inside information is … sometimes problematic, depending on where you get that information from. For instance, operations people at commodities exchanges really shouldn’t be telling traders on those exchanges confidential information about other traders’ positions and trades. Like Billy Byrnes and Christopher Curtin allegedly did. It’s bad. Humongously bad even: Read more »