Insider trade on Splunk acquisition?

Fair markets are efficient markets. Regulators try to keep the markets fair and efficient. If a market is unfair, participants are scared away, which leads to more inefficiency and potentially a collapse of the market.

Insider trading also makes markets more efficient. So I don’t think your argument is as strong as you think.

I also think it’s weird we don’t apply this consistently. I can buy many assets with “non public information”, just not those the SEC regulates. So it’s not really about markets at all, but specifically about fairness for shareholders (or something by like that?)

It is by definition not efficient because some participants have more information available to them than others.

you are muddying two concepts. It is important that people have the perception that markets are fair, and actual fairness should be considered an important part of that.

but in terms of market efficiency, trading on inside information actually does move the market in the correct direction, toward its new market clearing price, so trading on inside information generally makes the market more efficient: if you are trading based on statistical properties of the market, "a diversified portfolio across market sectors", having the prices be corrected will give you a more balanced portfolio.

I'm not an expert on the intricacies of the regulations around acquisitions, but Cisco, big company, deciding to acquire Splunk, smaller company, is a very material fact about Splunk. Acquirers are only allowed to acquire a certain number of shares before making a public tender offer, because shareholders are entitled to know this information.

answering GPs question "who is harmed", well if you collect profits on one big trade, they came from somewhere, they came from people who traded with you without having the information you have, a trade which you enticed by making your lowball offer which only appeared like a good offer because they were in the dark. If such trades were legal, then insiders would corner the entire market for shares before any announcement was ever made.

the "secret" about the pending acquisition is what makes the market inefficient. Trading based on the secret information does integrate that asymmetric information into the price creating better price efficiency.