During the mid-19th century, Paul Julius Reuter used carrier pigeons to fly stock market prices between Brussels and Aachen, Germany. Now, Reuters is doing (sort of) the same thing.
For the University of Michigan consumer confidence survey, Thomson Reuters was speeding data to certain clients but not to everyone.
- 9:54:58 a.m. to the highest paying subscribers
- 9:55 a.m. to “desktop subscribers”
- 10:00 a.m. to everyone else
However, the release of yesterday’s survey results–that consumer confidence peaked at a 6-year high, that people feel better about jobs prospects and that households’ assets were rising–was different. Because of pressure from the NY Attorney General, Thomson Reuters’s highest paying subscribers did not receive the data beforehand.
Thomson Reuters was asked by the NY Attorney General’s office to eliminate the earliest release until a “probe” has been completed. Resisting at first because their transactions involved lucrative client services, Thomson’s finally acquiesced to the Attorney General’s request. They will though continue providing clients with the data 5 minutes ahead of its general release.
Thomson Reuters pays the University of Michigan more than $1 million annually for the right to disseminate the info. Thomson Reuters then profits by charging its clients for the privilege of getting an early peek at the report. And, even then, all is not equal because clients who pay an extra $6,000 a month get the report 2 seconds before all others. Those 2 seconds provide enough time for millions of high frequency millisecond timed trades to occur before anyone else knows anything.
Since the beginnings of stock markets, people have always tried to get information before anyone else. Whether it was Reuters’s carrier pigeons or Charles Dow’s and Edward Jones’s newsletters, always, some investors have had an information advantage.
The question though is when is it okay to have an information advantage?
An answer takes us to two criteria that relate to Reuters’s pigeons and Reuters’s early computer releases.
- Public or private? While official stats from the US should be equally available, it is okay to selectively disseminate privately gathered data.
- Secret or transparent? When investors can pay for data, their transactions should not be hidden.
Sources and resources: I found the intricacies of data release timing ever more fascinating after reading this NY Times Dealbook article and CrainsDetroit on the Michigan/Thomas Reuters relationship. As for the survey itself, this Bloomberg description was enlightening.