The BBC recently ran a story hyperventilating over “the insider trading suspicions looming over Trump’s presidency.” This is just one piece of a genre: there have been numerous other stories during the period of the war pointing out that there have been oil trading volume spikes shortly before Trump Truth Social posts regarding war-related news.

The BBC has examined trade volume data on several financial markets and matched them to some of the president’s most significant market-moving statements.

It found a consistent pattern of spikes just hours, or sometimes minutes, before a social media post or media interview was made public.

The BBC then stated: “Some analysts say it bears the hallmarks of illegal insider trading, whereby bets are made by people based on information that is not available to the general public.”

Either the BBC is mischaracterizing what “some analysts” told it, or these analysts are full of it.

Even in securities markets in the United States, under Rule 10b-5, trading on “information not available to the public” is not illegal. Instead, the information must have been obtained illegally, or trading on it represents a breach of a duty.

With respect to commodity futures markets, “insider trading” was not even a thing prior to the passage of Frankendodd in 2010. That piece of legislation incorporated a new anti-manipulation rule that essentially copied 10b-5. Since insider trading is illegal under 10b-5, the insider trading is plausibly illegal in commodity futures markets as well.

The CFTC implemented the authority established by Dodd-Frank in its Rule 180.1. The rule elicited considerable commentary, on the issue of insider trading generally. This was framed as a discussion of “material non-public information” (“MNPI”):

The Commission recognizes that unlike securities markets, derivatives markets have long operated in a way that allows for market participants to trade on the basis of lawfully obtained material nonpublic information. This final Rule does not prohibit trading on the basis of material nonpublic information except as provided in the following paragraph or otherwise prohibited by law.

And the following paragraph?

Depending on the facts and circumstances, a person who engages in deceptive or manipulative conduct in connection with any swap, or contract of sale of any commodity in interstate commerce, or contract for future delivery on or subject to the rules of any registered entity, for example by trading on the basis of material nonpublic information in breach of a pre-existing duty (established by another law or rule, or agreement, understanding, or some other source), or by trading on the basis of material nonpublic information that was obtained through fraud or deception, may be in violation of final Rule 180.1. [Emphasis added.]

That is, trading on MNPI is a necessary, but not sufficient condition to violate Rule 180.1. The information must have been obtained by fraud, or theft, in order to rise to the level of a violation. And the norm in these markets is that trading on MNPI is NOT insider trading.

What is the likelihood that these conditions are met in any of the events set out in the BBC article? Small. Very small. For Trump or anyone connected to him? Even smaller.

Consider the March 9 event, where Trump was interviewed by phone by CBS, and the network released the content of that at 1829. Trading volume spiked about 47 minutes earlier. We don’t know the time of the interview, but presumably there it was considerably before the story ran. Meaning that there were people in CBS News who knew about it. Presumably several. Meaning that it could have escaped into the wild and sparked the trading volume noted by the BBC.

Meaning that if anyone violated 180.1, it was likely someone tipped of by CBS. Was this obtained by fraud? Was there a duty by anyone at CBS not to disclose this information?

The BBC also calls out a blip in trading activity (smaller than on March 9) on March 23 about an hour prior to Trump backing off his threat to attack Iranian power plants and bridges. This spike was smaller than the one on March 9.

But the decision that Trump announced was surely not made up at the instant he started tapping his post into his phone. And many people would have known about that. And DC leaks like a sieve.

You don’t leak information you are going to trade on. And the very volume of the trading that attracted the attention of the BBC and other news outlets makes it highly unlikely that any of those in the administration who were privy to this development were the traders responsible for the volume spike.

Eyeballing the BBC graph there were around 5000 lots traded during the spike. In round numbers, about $570 million worth of oil. The March 9 spike was even bigger, around 8000 contracts (~$800 million). So either a lot of people/firms had the news and were trading, or a couple of big institutions were doing so, or both. Nobody in the government would have the ability to trade in that size, and if they did, they would be total idiots to do so.

That is, the facts are most consistent with leaks leading to trades by someone outside the administration. And the leaks are not necessarily from within the administration: in the March 9 case, the information plausibly came from CBS.

Yes, it was non-public information (in the sense it had not been publicly disclosed), but as noted above that is not sufficient to establish an insider trading violation. And it certainly does not establish that Trump, or anyone in the administration, profited from this information.

Yes, there could be a violation here. One could argue that a leak from within the administration was a breach of a duty. But what if the information had not been classified? Would its revelation be a breach? Would anyone who acted on it have obtained it by fraud, or in violation of a duty?

It has long been known that securities prices often move well prior to public announcements, such as takeover announcements. Information is hard to keep contained, especially when related to things that involve many people. Such information leakage results in insider trading prosecutions only in extraordinary circumstances.

In other words, what has the BBC and others reporting breathlessly in the walls-are-closing-in genre is pretty much the norm in financial markets. Information tends to flow prior to public disclosures, and seldom constitutes a crime (or civil violation) when it does. If anything, the story just illustrates how pervasive leak culture is in DC. But as beneficiaries of that culture, don’t expect the BBC or any other media organization to call it out.