[btilly]

More problematic are the "C" traders. People with access to inside information who therefore believe that they'll get news of things that will shift prices before anyone else. These people are then able to take risks and time more aggressively, trusting that they'll be able to jump ship at need. These people therefore avoid revealing inside information until the last possible moment.

But the real trouble is the "D" traders. People with no access to inside information who have no interest in providing excess rents to traders A, B or C. When this group of people gets the impressions that the real gains in stocks go to insiders, and outsiders get the shaft, they stay away in droves. In fact the desire to encourage this group to invest is one of the primary reasons for the insider trading laws in the first place.