Abstract: When a U.S. firm trades its own shares in the open
market, it is subject to much less stringent trade-disclosure
rules than an insider of the firm trading in those shares.
Insiders owning equity in their firm thus frequently engage
in indirect insider trading: having the firm buy and sell its
own stock at favorable prices. Such indirect insider trading
imposes substantial costs on public investors in two ways:
by systematically diverting value to insiders and by
causing insiders to take steps that destroy economic value.
To reduce these costs, I put forward a simple proposal:
subject firms to the same trade-disclosure rules imposed
on their insiders.