Merritt B. Fox, Lawrence R. Glosten, Gabriel V. Rauterberg, Informed Trading and Its Regulation, 43 J. Corp. L. 817 (2018):
2 For just a sampling of seminal early work in this area, see Henry Manne, Insider Trading and the Stock Market 131-45 (1966) [hereinafter Manne, Insider Trading] (arguing that insider trading is efficient because it promotes pricing accuracy and entrepreneurialism); Stephen M. Bainbridge, Insider Trading Under the Restatement of the Law Governing Lawyers, 19 J. Corp. L. 1, 21 (1993) (arguing that the prohibition on insider trading is best justified as a property right protection for information); Victor Brudney, Insiders, Outsiders, and Informational Advantages Under the Federal Securities Laws, 93 Harv. L. Rev. 322, 343, 347-48 (1979) (analyzing the proper scope of the disclose-or-abstain rule); Dennis W. Carlton & Daniel R. Fischel, The Regulation of Insider Trading, 35 Stan. L. Rev. 857, 862 (1982) (arguing that permitting insider trading may be an efficient way to compensate corporate managers); Zohar Goshen & Gideon Parchomovsky, On Insider Trading, Markets, and “Negative” Property Rights in Information, 87 Va. L. Rev. 1229, 1238-43 (2001) (arguing that widespread insider trading would drive market analysts out of business with deleterious consequences for the informational quality of securities prices); Roy A. Schotland, Unsafe at Any Price: A Reply to Manne, Insider Trading and the Stock Market, 53 Va. L. Rev. 1425 (1967) (arguing that insider trading may be injurious because it deters investors who perceive it as unfair from trading in securities).
109 ... The negative effects of insider trading on liquidity, and to a lesser extent price accuracy, have already been noted by a vast and rich legal literature, often arguing in favor of existing legal bans. For just a sampling of classic papers, see Bainbridge, supra note 2, at 11-12; Mark J. Loewenstein & William K.S. Wang, The Corporation as Insider Trader, 30 DEL. J. CORP. L. 45, 74-77 (2005); William K.S. Wang, Stock Market Insider Trading: Victims, Violators and Remedies - Including an Analogy to Fraud in the Sale of a Used Car with a Generic Defect, 45 VILL. L. REV. 27, 38 (2000); H. Nejat Seyhun, Insiders' Profits, Costs of Trading, and Market Efficiency, 16 J. FIN. ECON. 189, 190-92 (1986); Jonathan R. Macey & Maureen O'Hara, From Markets to Venues: Securities Regulation in an Evolving World, 58 STAN. L. REV. 563, 589 (2005). Others have come to more ambivalent conclusions based on the finance literature. See Donald C. Langevoort, Rereading Cady, Roberts: The Ideology and Practice of Insider Trading Regulation, 99 COLUM. L. REV. 1319, 1324 (1999) (stating that the alleged injury to investors from insider trading is yet unidentified).
No brag. Just fact.