The decision was disclosed today by New York Attorney General Eric Schneiderman, who is cracking down on what he says are special privileges offering high-speed traders unfair advantages over other investors. Schneiderman yesterday announced a probe into whether stock exchanges provide banks and trading firms with faster access to data and richer information than what’s typically available to the public.
By directly subscribing to Marketwired’s stream, traders could shave thousandths of a second off the time it takes to receive and process potentially market-moving information in press releases. Business Wire, a division of Warren Buffett’s Berkshire, said last month that it would shut off traders.
“My office is committed to ensuring a fair, stable, and transparent market,” Schneiderman said today in a statement. “High-frequency traders who drain the value out of market-moving information in the milliseconds before it becomes widely available to other investors erode confidence in our markets and skim from the rest of the investing public.”
Bernadette Lee, a spokeswoman for Toronto-based Marketwired, didn’t immediately respond to a call for comment on the decision. The company has more than 15,000 clients, according to its website.
Calling the issue “Insider Trading 2.0,” Schneiderman said in September at the Bloomberg Markets 50 Summit in New York that his office was looking into ways to combat advantages secured by investors with high-speed trading systems and early access to market-moving data. At the time, Schneiderman called investors with sneak previews of sensitive information “a new generation of market manipulators,” and said the problem is a growing threat to the integrity of the financial markets.
In February, 18 financial firms including JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) agreed to stop participating in some surveys of analyst sentiment by “certain elite, technologically sophisticated clients” seeking to use the information for trading, Schneiderman’s office said.
The interim agreements, set to last while the attorney general investigates the issue, followed an accord in January with BlackRock Inc. (BLK), the world’s largest asset manager, to end a program in which it systematically surveyed analysts on companies they cover.
Some survey questions were worded to capture analysts’ views about management, competitive position, earnings and other aspects of companies, giving BlackRock information that could be used to front-run analyst revisions, Schneiderman’s office said in a statement.
In July, Thomson Reuters (TRI) Corp. agreed to suspend its early release of the Thomson Reuters/University of Michigan index of consumer sentiment to high-frequency traders two seconds ahead of other subscribers while Schneiderman continued his probe. Thomson Reuters competes with Bloomberg LP, the parent of Bloomberg News.
To contact the reporter on this story: Christie Smythe in Brooklyn at firstname.lastname@example.org