What? He Didn’t. He Did? Ahahahaha

The German stock exchange operator Deutsche Börse has agreed to pay 10.5 million euros, or about $12.5 million, in fines to resolve an investigation by German authorities into possible insider trading before its talks to merge with the London Stock Exchange Group became public.

The proposed deal between the two exchange operators was announced last year, and would have created by far the largest operator of stock markets in Europe, combining bourses in Britain, Germany and Italy as well as several of the region’s largest clearinghouses. The proposal fell apart this year.

The public prosecutor’s office in Frankfurt has been examining share purchases by Carsten Kengeter, the Deutsche Börse chief executive, in December 2015.

Well, everyone’s insisting he didn’t but they’re to pay the fine anyway.

So, let us just consider this as an allegation. The CEO of a stock exchange is alleged to have insider traded over the merger of his own stock exchange. Can we get much more recursive than that?

13 comments on “What? He Didn’t. He Did? Ahahahaha

  1. The CEO is alleged to have done insider trading, but the company has to pay the fine? Either the company is paying his fine for his own personal action (which would be a massive benefit in kind to their senior employee), or he was insider trading on behalf of the company.

  2. Why is insider trading banned? All trades take place on the basis of asymmetric information, and this is just an extreme example.

    Especially if when you bought or sold shares we made it a public record (who is buying and who is selling and how much).

    We do that with real estate, so why not with shares? Just imagine how much more efficient markets would be, if we knew the CEO of DeadbeatCo was selling up! Before, rather than after the fact!

  3. Großer: if I knew my friend the CEO of Deadbeat was selling and you didn’t and if the CEO gave an optimistic interview on the basis of which you bought Deadbeat shares while I was selling mine you would feel ripped off.

    This is not hard.

  4. @Porzellankuh,

    Which would be solved by making transactions a matter of public record. We already do this with real estate so there isn’t any real “privacy” issue. Let’s make markets more efficient and get that pricing information out there.

    Even cars are sold on the basis of asymmetric information. Isn’t selling a lemon without being open about it “insider trading”?

    Henry – that’s the whole point.

  5. BiG

    “Even cars are sold on the basis of asymmetric information. Isn’t selling a lemon without being open about it “insider trading”?”

    And against the law, which goes to reinforce the point.

  6. Biggie Which would be solved by making transactions a matter of public record.

    You’re not serious – how many trades go through nominee accounts and how many thousands upon thousands of trades do you think happen across multiple exchanges every day?

  7. > so there isn’t any real “privacy” issue

    Seriously? I’d like to keep my meagre poverty / vast wealth (delete as appropriate) private, thank you very much!

  8. In the UK, at least, company directors are required to report their trading in that company’s shares. A quick google implies this is the case in Germany also.

  9. Only €10.5 million?! That’s because Germany can balance its budget. In New York the fines levied by the state (not the Feds, the state) ruin into $billions if the alleged offender/shake-down target is foreign.

  10. More interestingly, the CEO of a major exchange presumably thought he could get away with it.

    Good grief.

  11. Trade reporting is a thing already but insiders trade a short while before events so timing and seeing what is going on is a real issue. Then there is the fact that that people on the other side of the trade have lost out on significant upsides as a result of having someone, who wouldn’t have been in the market except for their inside knowledge taking their offered shares. (Hard to quantify this one but it is an argument made). Then there is the fact that the directors are the agents of the shareholders, who they are ripping off, and conflicts of pinteretsvare really unhealthy for shareholder based capital structures. Tons more.

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