Some of the world's top financial data providers are under investigation over the profits that sophisticated investors make by paying for early access to market-moving information. Under pressure from New York state's attorney-general, Eric Schneiderman, Thomson Reuters yesterday suspended its practice of releasing closely-watched consumer sentiment data two seconds early to clients who pay extra.
Mr Schneiderman’s office is investigating the $25 billion market data industry, and the profits made by some of its biggest clients from trading in the minutes or milliseconds before other investors see market-sensitive data, one person familiar with its probe said.
The investigation was triggered by questions over Thomson Reuters’ partnership with the University of Michigan. Since 2008, the company has offered a select group of high-frequency trading houses, banks and other clients the opportunity to pay a fee, reportedly as much as $6,000 a month, to receive the university’s twice-monthly consumer confidence survey two seconds ahead of other clients.
Several other economic reports are available early to select investors, including Markit’s Purchasing Managers’ Indices, which Thomson Reuters distributes to all its subscribers two minutes early.
The Chicago Business Barometer from Deutsche Börse and the Institute for Supply Management has also been available three minutes early.
Early data
Mr Schneiderman's team was looking more widely at whether such early data releases violate the Martin Act, a New York state law that allows prosecutors to pursue fraud charges without having to prove intent, a person familiar with the investigation said. The law was used by Eliot Spitzer, the former NY attorney-general, to extract lucrative settlements from Wall Street banks a decade ago over their analyst research.
The investigation was examining the profits made by trading companies using the data, this person added, saying that the scope of any potential penalties could consider those gains. – Copyright The Financial Times Limited 2013
