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Are Google Guilty of Insider Trading?

I’m currently consulting on a BBC programme to be broadcast in the autumn which is all about the mathematics of everyday life. Not allowed to say any more about it, but there is a section there about how Google can inform hospitals of impending flu epidemics days before they actually hit by tracking the search terms people are using.

I raised a question as we looked at that that has been (partly) raised in The Independent today: if Google can do this with health stats, can they, indeed are they, doing it with financial information too?

It appears that they are prepared to admit that they can tell the Bank of England about where house prices and unemployment figures are going, using the same technique of analysing search terms, but there is nothing in there about whether people might be using these techniques to predict rises or falls in currencies, stocks or commodities. What they do admit is that:

“There is also evidence that these data could provide additional insight on a wider range of issues.”

It would not surprise me one bit if they were, or if some within the organisation are, under the radar effectively making insider-dealing trades – buying and selling with good foreknowledge of what is going to happen in a particular market.

Personally, I’d like some clarity on this from them. Why? Because they are aggregating information from millions of individuals, and then as sole guardians of that information, possibly putting it to huge personal gain.

Capitalism relies on information vacuums: I can make money knowing something that you don’t. What concerns me is that this effect is magnified to a near-infinite degree with the quite extraordinary data-set that Google have access to. I think it’s very important that they offer some clarity on this, and are perhaps given some advice by financial regulators about what they are legally allowed to do.

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2 comments to Are Google Guilty of Insider Trading?

  • leon

    Firstly, while I am not a lawyer, I would suspect that they would not be technically guilty of insider trading if they did do this, since I’m not sure the information they have (and don’t publicise) really counts as insider information, since they haven’t obtained it through any sort of ‘insider’ relationship. That is, of course, a legal not a moral argument.

    Secondly, they actually do have very strict controls on how search data is used internally so I would be very certain that neither Google as a whole nor any rogue/imaginative employees within Google are doing this. However, for reasons I don’t quite understand, the nature of these strict controls are considered secret.

    Thirdly, it’s worth noting that they make simple information like this publicly available, via google trends (also available as an API). I suspect that the flu prediction thing (and the other things that google have admitted) could be done via the public API, meaning Google aren’t making use of information they aren’t giving to the public. There would be some valuable deep dives that can’t be done with the public info (watching search trends actually coming from a particular company as an obvious example), but if you want to track changes in the popularity of particular searches globally, anyone can do that now.

    So I don’t think google is doing this, but anyone else can if they want to!

  • KB

    Question is though, is the info in the API ‘live’? And is it comprehensive? My concern would be an information delay that people could make use of. A little worrying that they feel the need to keep controls secret…