Senators Urge SEC to Fix Unequal Access to Market Data
The U.S. Securities and Exchange Commission must ensure its system for distributing companies financial information doesnt give unfair advantages to private-feed subscribers, two lawmakers said in a letter today.
The SEC should explain what its doing in response to findings that customers paying for direct feeds sometimes saw market-moving disclosures 10 seconds before they were posted to the agencys website, Senators Tim Johnson and Mike Crapo wrote in the letter to SEC Chairman Mary Jo White.
The disparities were described in a paper by researchers at the University of Colorado and the University of Chicago.
This unequal access is even more troubling because it results from SEC-managed systems, wrote Johnson, the South Dakota Democrat who leads the Senate Banking Committee, and Crapo of Idaho, the panels top Republican. Please explain the steps you are taking to fully understand and eliminate the disparity and when these steps will be completed.
Distribution of U.S. financial information has been a flashpoint in the debate surrounding high-frequency traders, the electronic firms that have supplanted human market makers and account for as much as half of all stock trades. New York Attorney General Eric Schneiderman began an investigation this year into whether the fastest traders get advantages unavailable to others.
The SEC said last week its reviewing how its data is disseminated by a contractor, Attain LLC, that manages the system. The information is sent through the SECs Public Dissemination Service, which relays the data to the regulators website and distributes it to firms paying for a direct feed. Gina Talamona, an SEC spokeswoman, declined today to comment further.
The disparity between the private feed and the appearance of data on the SECs website has narrowed since it first became public last week, according to Robert J. Jackson Jr., a professor at Columbia Law School. Jackson pays for a private feed and is preparing a separate paper about the profits that can be earned with Joshua Mitts, a fellow at Columbias Ira M. Millstein Center for Global Markets and Corporate Ownership.
On Oct. 28, data appeared on his direct feed an average of 35 seconds earlier than it posted to the SECs website, Jackson said in an interview today.
The following day, the lag narrowed to 27 seconds, he said. Filings data showed up on his direct feed three seconds earlier on Oct. 30 and 2.5 seconds earlier on Oct. 31, he said. The Wall Street Journal first reported on the paper by the University of Colorado and University of Chicago researchers on Oct. 29.
What is clear is that the SEC and Attain, the private party responsible for this, is struggling to close the gap, Jackson said. They seem to have pushed back the feed in a way that is designed to address the problem, but havent fully achieved that yet.
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Senators Urge SEC to Fix Unequal Access to Market Data