Insider trading inherently carries risk, as trading while in possession of material non-public information could lead to litigation. A pre-arranged trading plan under Rule 10b5-1 helps insiders to mitigate that risk by assigning a third party to execute trades pursuant to a pre-arranged plan on their behalf.
Unlike other services, we pull out 10b5-1 information from Form 4s and Form 144s to determine when trades are made under 10b5-1 plans and which plans they are a part of. We can also use this to determine which brokers are capturing the market for brokering insiders’ 10b5-1 trades.
How does this affect insider trading analysis? EZ-Insider flags the trades made under 10b5-1 plans so that users can clearly see when trades are made on behalf of an insider. When we look at the timing of trades made by an insider, we try to “get into their head” to see if the trade is an actionable signal about the potential movement of a security. If an insider is buying or selling outside of a pre-arranged plan, that could be a signal that they think the stock will make a corresponding movement. However, trades that are made pursuant to a rule 10b5-1 plan are usually less likely to be signals of the stock’s direction, because insiders are planning them well in advance.
10b5-1 Plan flags on transactions are just one of many ways that EZ-Insider helps to cut through the noise to help you find actionable information from insider filings.
In addition to just flagging 10b5-1 trades, we also have a market-leading database of 10b5-1 plan information based off of the plan dates supplied by the filer. This allows us to see who is adopting new 10b5-1 plans and who hasn't adopted one in a long time, and to see a full picture of 10b5-1 activity at a company or industry. This database allows users to find important insights into the 10b5-1 brokerage market.