Insider-Trading Concerns over Privileged Access to Sensitive Data

Concerns are being raised about the potential for insider trading involving high-speed traders who make investments based on market- moving data. Recently New York Attorney General, Eric Schneiderman called on federal officials to take steps to prevent such insider trading, or what he calls “insider trading 2.0.”

The concerns over high-frequency traders, who have access to soon-to-be released market-specific sensitive information, have been around for a while now, but it has been rare to see public officials voice these concerns. According to Schneiderman, there needs to be comprehensive action on this new form of market manipulation, and the action definitely needs to come from the federal administration.

Recently, a deal was announced between Thompson Reuters Corporation and the University of Michigan. Under the terms of the arrangement, customers who pay for the privilege will get access to the university’s consumer confidence survey much before the results of the survey are released to the public.

Under the deal, Reuters will pay the University Of Michigan approximately $1 million a year for the privileged early access to the consumer confidence data. Reuters, under the terms of the deal, would then give the results of the survey to high-paying customers 5 minutes before the University releases the results of the survey on its website.

There are several layers of exclusivity in this deal. An even more exclusive group of high-frequency traders will pay a much higher fee to get the survey results exactly 2 seconds before the first group gets access to the results.

The New York Attorney General’s concerns have drawn a lot of attention, and already Thomson Reuters has stated that it firmly believes that news companies can release non-governmental data on a privileged, limited access basis to paying customers.

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