606 CAPITAL MARKET REGULATIONS-MAFCM, BICM

CLASS ASSIGNMENT 01: INFORMATION MOTIVATED TRADERS

Name: Muhammad Russell Hasan, ID NO: MAF 04-008, DATE: February 08, 2024

Information-motivated traders are individuals who make investment decisions based on

non-public information that they believe gives them an edge over other market
participants. They aim to exploit this information advantage by buying or selling assets
before the market reflects the new information in their price.
Here are some key points to remember about information-motivated traders:
• Information source: Their information can come from various sources, including
industry insider knowledge, company leaks, or early access to data and reports.
• Trading goal: They seek to profit from price movements caused by the market
incorporating their new information.
• Market impact: If successful, their trades can influence asset prices and contribute
to market efficiency by bringing new information to light.
• Ethical considerations: Using illegal insider information for trading is illegal and
unethical. However, using publicly available information and conducting thorough
analysis falls within acceptable practice.
Here are some real-world examples of information-motivated trading:
- A company employee learns about a positive earnings surprise before it's announced
and buys the company's stock.
- An analyst receives a research report indicating an upcoming product launch and
recommends buying the relevant stock for their clients.
- A news organization gets wind of a potential merger and publishes an article, causing the
stocks of both companies to fluctuate.
It's important to remember that information-motivated trading is complex and carries
risks. Factors like market sentiment and trading costs can impact results even with an
information advantage. Additionally, ethical considerations are crucial, and traders must
ensure their information sources are legal and publicly available.