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Explain me friends

uma CA Final (-) (266 Points)

29 November 2011

hi friends

plz xplain about insider trading???

wat u mean by insider trading??

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3 Replies

SONUJRT (CA FINAL STUDENT) (337 Points)
Replied 29 November 2011

insider trading means taking undue advantage from sensitive , unpublished data of companies by trading that stock of the co. in the stock market. insiders may be promoters, employees,auditors, all their relatives etc. for eg employee knows any sensitive unpublished info of the co. which may affect the sentiments of mkt if the same got published and speculating that stock there of either himself or thru its relative in the stock market is termed as insider trading.

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CS RAJESH C.CHOUDHARY (ASSISTANT MANAGER) (14607 Points)
Replied 29 November 2011

Dear Uma,

Refer this link a very nice explaination to your Query by CMA SANJAY GUPTA SIR

/forum/insider-trading-an-overview-part-i--164892.asp

Arijit Bhattacharjee (ACA, M.COM) (407 Points)
Replied 30 November 2011

Its alwaya credible to give a complex answer to complex question and win admiration,

But shall try to give a simple answer to this question meant for every layman (all regards to Rajiv Singh FCA, LIFA sir cause itz reiteration of his explanation):

A a famous festival of Mumbai is the DAHI HANDI on the eve of JANMASTHAMI.

The concept is forming Human Pyramid to reach the HANDI(Pot full of Curd,yogurt) at the height of 10-20 storey buildings.

Just think that that Handi is the Stock Price(Expected), the basement is the Floor Price or current Market price of a stock.

The Govindas or the guys forming the chain are strong and experienced players (In our example they are brokers and day traders)

The layman who thinks i shall get the HANDI and win Lakhs is the RETAIL INVESTOR, who casually comes to the govindas and says "please get me to the top".

Thus, they use the Investor as goat for slauhghter and start forming price chain buy slowly intra trading

Finally when the chain is built, they pass the stock to the INVESTOR (puts him at the top) and lets him grab the handi(Stock).

Immediately the Govindas(Traders, Brokers) break the pyramid and vanish, thus leaving the INVESTOR hanging Top helplessly

He has two options now

1) Leave the Handi and Fall freely and break his bones(Book Huge Losses)

2) Stay Hanging and expect the basement to Rise up (Wait for Stock prises to Rise)

Thus in Traditional way, this is probably how insiders trade..............

NOW, THINK THE LOGIC WHY SEBI SHOULD NOT INTERFARE AND MAKE STRONG RULESSSSSSSSS

Hope that Helps......

Cheers

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