Are Merchant Banks Trading Using Stock Exchange Secrets?Do Wall Street 'types' have access to stock exchange secrets? This is a great place to start looking for the inside track. Unfortunately, most (or all) of this real inside knowledge is illegal to use. There are a few court cases every year which involve insider dealing from a source who should know better. This might be a journalist with access, a money manager or analyst of some sort. The usual image of this comes from the film Wall Street in which Michael Douglas won an Oscar. His character was Gordon Gecko, a super wealthy, ruthless and very powerful fund manager who uses Bud Fox (played by Charlie Sheen) to gather competitive intelligence on a company he was interested in. This intelligence involved following a company chairman, posing as an office cleaner and copying sensitive documents. In other words, he was stealing his stock exchange secrets! Gecko then traded on the information through offshore sources to hide his involvement. Whilst this may happen (who knows?), a more likely scenario is one where people working for the same firm have access to different departments with knowledge that may assist in multiple parts of a trading operation. In theory, there should be a 'Chinese wall' but this is very difficult to guarantee in any real business.
Whilst we are clearly not suggesting anything untoward, a quick look at this list of services offered by investment banking giant Goldman Sachs - for both companies and individuals - it is easy to imagine how staff members could be involved in exchanging information. In fact, colleagues could easily pass over sensitive information unwittingly or unknowingly. It is worth noting that most major investment banks offer a similar list of services. Some smaller firms will be more 'boutique' and offer a much more specialised service, but the bigger a firm becomes, the more of these operations they are involved in.
Since there is such a lot of money involved in major market deals, information sharing could easily be very profitable for all concerned. It would however, set the rest of the market at a significant disadvantage. To read more about stock exchanges, please visit:
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