Sound Off: Is Thomson Reuters Giving Elite Traders and Unfair Advantage?

CNBC is reporting that Thomson Reuters TRI gives an elite group of traders a two-second head start on key economic data that is important enough to move markets. Sound like the company is the SEC’s next target? Probably not!

The University of Michigan Consumer Sentiment Index is a measure of consumer confidence. The public university makes at least 500 phone calls and asks five core questions to generate the data. Thompson Reuters pays the University “around $1 million”, according to University officials, to gain exclusive access to the data.

As far as the general investing public is concerned, the data is released at 10:00 a.m. But what isn’t well known is that it’s released to Thompson Reuters’ paying clients at 9:55 a.m. through a conference call.

But even more, let’s say, “interesting”, is that an elite group of traders (presumably with deep pockets) receive the data at 9:54:58.000—a full two seconds before the conference call.

In the world of high frequency trading, two seconds is huge. In data compiled by CNBC, in the first 10 milliseconds of one of the advances, 100,000 shares traded hands. Within less than 100 milliseconds, the price of the SPDR S&P 500 SPY had jumped from $165.90 to $166.06. (2 seconds equals 2,000 milliseconds) In the first half second, more than $40 million had changed hands.

By the way, CNBC points out that it takes between 300 and 400 milliseconds to blink an eye.

Is this fair?

That’s the debate. Is it fair for these elite traders to receive the information earlier than the general public in a market where equal access is supposed to be one of its defining measures?

On one hand, this is private data that isn’t material to any specific stock. Proponents argue that it’s no different than a medical journal publishing key cancer data to paying subscribers before it’s released to the public.

Legally, providing Thomson Reuters disclosed the two second lead time, which it does, it’s probably in the clear.

Former SEC Chairman Harvey Pitt believes that there may be a disclosure issue and economists asked by SEC said that they weren’t aware that the data was released before the 9:55 conference call.

But what do you think? Is Thomson Reuters giving the biggest traders an unfair advantage by releasing the data early or is it providing adequate disclosure to the market and customers on its website?

Read the full CNBC article here, to learn more.