> So if I know the results of the orange harvest before you, I can buy frozen OJ futures and sell them to you even if you are not placing an order through me.
> You still lose out, I still take advantage of my private knowledge. Whats the difference?
Well in the specific instance you use, this would be legal. In the futures market it is not only legal to trade on "insider information", its also expected.
The reason is very simple...consider an orange juice producer, they know what their required input will be( the insider information), the entire purpose of the futures market is to let them go out and lock in a price they will pay so they can budget.
Now consider what would happen if you couldn't trade in the futures market with insider information. If their order would be so large or small that they would move the market then they would be locked out of the futures market and woudn't be able to lock in their price.
> You still lose out, I still take advantage of my private knowledge. Whats the difference?
Well in the specific instance you use, this would be legal. In the futures market it is not only legal to trade on "insider information", its also expected.
The reason is very simple...consider an orange juice producer, they know what their required input will be( the insider information), the entire purpose of the futures market is to let them go out and lock in a price they will pay so they can budget.
Now consider what would happen if you couldn't trade in the futures market with insider information. If their order would be so large or small that they would move the market then they would be locked out of the futures market and woudn't be able to lock in their price.