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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 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.

  • However in this case the raw information (server logs) is not public. – Paul Johnson Aug 7 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 Aug 20 at 20:05

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