PR Newswire Reaches Deal With Scheiderman in HFT ProbeChristie Smythe
PR Newswire, a leading news distribution service, reached a deal with the New York attorney general’s office in which it agreed to ensure its data feed isn’t used unfairly by high-frequency traders.
The agreement announced yesterday follows similar accords with Business Wire and Marketwired reached as part of Attorney General Eric Schneiderman’s effort to combat what he has described as unfair advantages secured by high-speed traders that gain early access to market-moving information.
“By going the extra mile to ensure its service is not abused by high-frequency traders -– at any time during the trading day and in the moments after the closing bell -– PR Newswire has proven itself to be an industry leader,” Schneiderman said in a statement.
High-frequency trading, conducted in tiny fractions of a second and the subject of author Michael Lewis’s “Flash Boys,” is facing a wave of scrutiny from state and federal regulators.
Justice Department officials and the Federal Bureau of Investigation said in the past month they were probing whether high-speed trading violates laws against insider trading.
At the Bloomberg Markets 50 Summit in New York in September, Schneiderman described high-speed investment firms with sneak previews of sensitive information as “a new generation of market manipulators,” and called the issue “Insider Trading 2.0.”
PR Newswire agreed to require its direct-feed recipients to certify annually that they won’t engage in high-speed trading and promised to encourage customers to release news intended for the close of the markets at 4:01 p.m. New York time instead of 4 p.m. to make sure high-frequency traders can’t use it in the milliseconds after the closing bell, Schneiderman’s office said yesterday.
The New York-based company previously declined to provide its feed to high-frequency traders and has now formalized that policy, Schneiderman’s office said.
PR Newswire Chief Executive Officer Ninan Chacko said in a phone interview that the company has had a “longstanding commitment to broad-based dissemination.”
PR Newswire has been approached “a number of times” about providing data to high-speed traders and has chosen not to, Chacko said. Clients also have already been counseled about releasing information at 4:01 p.m. instead of 4 p.m., he said.
“It really does fundamentally lead to ensuring that the information is received and digested by the intended recipient audience,” he said of the practice.
In deals with the attorney general’s office in February and March, Berkshire Hathaway Inc.’s Business Wire and Toronto-based Marketwired agreed to stop allowing high-speed firms to buy direct access to their services.
Schneiderman announced in March that he was probing whether stock exchanges provide banks and trading firms with special access to data, and his office has also subpoenaed several high-frequency trading firms about their arrangements with exchanges and dark pools, according to a person familiar with the matter.
In a broader probe into potentially unfair access to information, JPMorgan Chase & Co., Goldman Sachs Group Inc. and 16 other finance firms agreed in February to stop participating in some surveys of analyst sentiment while the state attorney general investigates the issue, according to Schneiderman’s office.
The deal followed an accord in January with BlackRock Inc., the world’s largest asset manager, in which it agreed to end a program to systematically survey analysts on companies they cover.
Thomson Reuters Corp. in July agreed to suspend its release of the Thomson Reuters/University of Michigan index of consumer sentiment to high-frequency traders two seconds ahead of other subscribers while the New York attorney general continues the probe. Thomson Reuters competes with Bloomberg LP, the parent of Bloomberg News.
The two-second gap was enough time for traders to take “unfair advantage” of access to the information, the attorney general’s office said at the time.