Introduction of Insider Trading

[insiderslab]

What is Insider Trading?

Academic studies using 10 years worth of US company insider trading data suggest that corporate insiders earn above normal profits on their trades. The findings suggest that company insiders as a group are better informed than the average investors about the prospects for their respective firms. We believe that the tracking and reporting of company insider trades can help investors make better informed decisions about security selection and thereby improve their investment returns.

Every day, investors have the opportunity to put their money into more than 15,000 US stocks. But such a huge opportunity is also hugely confusing. How do you start narrowing down your investment choices? All investors can potentially increase their returns if they start their stock picking by looking at insider trading flow. It should come as no surprise to anyone that insider trading occurs every day in the stock market. However, it is impossible to screen all daily insider filings for all listed companies. So we need to use research tools that allows investors to monitor potential insider investment opportunities and helps investors to seek chances in an effective and systematic manner.

And I'll try to tell you Why insider trading research is becoming more important?

 

[insiderslab]

Investment brokers dominate the capital markets research industry in US, Canada, UK, Hong Kong, Singapore, Australia, Japan, and China. Individual have no access or cannot afford to access institutional equity research.

Recent studies indicated an inverse relationship exists between analysts’ “buy” recommendations and subsequent stock performance.

Conflict exists between brokerage research division and investment banking division; the so-called “Chinese Wall” remains rather porous.

Institutional investors usually receive their research from brokerage firms free of charge by placing trades through them (soft dollar arrangements).

Small and micro-cap investors have very little opportunity to access quality analytical research.

Since institutional investors are less interested in micro-cap stocks due to liquidity issues, brokerage houses are less likely to cover the micro-cap sector. Company insider trading research may become the ONLY source of information reflecting the business condition of micro-cap companies.

 

[insiderslab]

New regulation has created an opportunity for independent insider trade research

• Recent regulations in the US, UK, HK, and Canada require insiders to report their trades within days of transaction (48 hours in the US under SOX). Reported insider trade information is published in government sponsored websites.
  
• Insider trading is becoming a major component in equity analysis – insider trading filing sections are found in Yahoo, MSN Money, and Global & Mail. However, all these reported filings are incomplete hence do not add analytical value.
  
• Insider research is particularly valuable to small and micro-cap sector investors due to the inherent lack of transparency in such company operations.
  
• Therefore, there is a corresponding high demand for robust quality insider daily trading reports among individual investors, institutional investors, investment advisors, and portfolio managers.

 

[insiderslab]

What is our distinct competent?

There are some respectable amounts of free financial information available in the internet domain; however, almost 99% of the financial information is in “raw data” form. Only experienced investors with advanced data modeling knowledge or institutional research analysts with strong programming and application development team are able to convert the raw financial data into usable research reports; but they do not share their research with others as the cost to generate such research reports are very high.

Our distinct competent is to use proprietary data modeling methods and advanced database technology to convert or synthesize public free financial information into useful research reports available for all type of investors and corporate users. The following diagram demonstrates our proprietary data modeling process on how we add value to “Raw or Free” financial information; convert them into cleaned insider trading data and generate research reports that fits the needs for all kinds of users.