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Suppose I own a search engine. I look at my server logs and see that the query "how to fix exploding engine" is very popular in the area around Tesla headquarters. Would it be legal to act on this information and short Tesla? What if I had purchased this info from a public data broker instead?

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This is not insider information. Inside information is information received from the Company or an employee or agent of the company that has not been publicly disclosed. So, it does not violate federal insider trading laws.

It is conceivable that the search engine operator might have a contractual duty to to the company, for example, a non-disclosure agreement in an agreement for that company to advertise through the website. Likewise, there might be a privacy policy vis-a-vis customers saying what their searches would and would not be used for doing, which this use could conceivably violate.

But, in general, the use of this data is not a securities fraud violation, and I know of no other regulations of search engine operators or other businesses that obtain generalized information from customers that would prohibit the use of information like this to trade publicly held securities.

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  • This information was certainly received from the company (or its employee or agent). Has this information been publicly disclosed?
    – Criticizing Israel not allowed
    Commented Jul 28, 2021 at 10:18
  • @user253751 The information was collected by the search engine and while individual searches were communicated to the search engine by people who may include company affiliated people, the aggregation of the searches, which is what it is trading on, was not communicated by the company and is not known to the company.
    – ohwilleke
    Commented Jul 28, 2021 at 15:34
  • does that count as public disclosure?
    – Criticizing Israel not allowed
    Commented Jul 28, 2021 at 15:49
  • @user253751 No.It is not a public disclosure. But it the OP fact pattern also isn't consider a disclosure by the company or its employees or agents. In the same way, that, for example, ordering parts of a machine isn't a disclosure by the company of fact that can ve inferred by looking at all of the parts that the company orders.
    – ohwilleke
    Commented Jul 28, 2021 at 16:08
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This is no different from counting the number of cars in a parking lot of a certain retailer (to estimate their projected revenue). As long as this information is already public, the fact that there aren't any public sources of the aggregate data about the information does not change the fact that the information is already public.

Although, once produced, the aggregate data maybe copyright the entity which produced it. This has come up, in at least one, lawsuit involving LexisNexis.

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  • However in this case the raw information (server logs) is not public.
    – Paul Johnson
    Commented Aug 7, 2019 at 14:04
  • @pauljohnson, someone else's server logs are not public. But if you want the analogy to be even closer, this is more like a company which owns a parking lot of a mall estimating mall's revenue. It's still 3rd party information. So it's not "insider" information.
    – grovkin
    Commented Aug 20, 2019 at 20:05

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