Insider trading at hedge funds?

What does it take to get prime brokerage business these days? Well, the Securities and Exchange Commission is looking into whether some firms may be giving away a bit of inside information about large block trades, which of course would be a no-no. Morgan Stanley and Merrill Lynch are among the firms receiving letters of inquiry. Mutual fund companies seem to be behind the push. They have complained for years that proprietary traders are front-running their trades. The SEC seems focused on stock and option trading data, which means it is not yet looking at more esoteric derivatives, which have often experienced suspicious volume spikes ahead of deals, as one example. This is one of those cases that could be based on the work of staff economists, armed with data.

For more:
- here's the New York Times article