New York, NY - February 20, 2014 - Attorney General Eric T. Schneiderman today issued the following statement on the decision by Business Wire, a subsidiary of Berkshire Hathaway, to stop selling direct feeds of the information it distributes on behalf of clients to high-speed trading firms:
“Business Wire’s decision to voluntarily step forward and stop selling its clients’ information directly to high-speed traders is a tremendous victory for our effort to eliminate advance trading on market-moving information and a demonstration of Business Wire’s commitment to being a responsible industry leader. My office is committed to ensuring a fair, stable, and transparent market. That means cracking down on the bad actors and encouraging industry leaders to step forward and self-police their industry. High-frequency traders who drain the value out of market-moving information in the milliseconds before it becomes available to other investors erode confidence in our markets and skim from the rest of the investing public, which hurts the entire market. I strongly encourage other participants in this industry to follow the leadership of companies like Business Wire and join us in the effort to level the playing field between high-frequency traders and the rest of the investing public.”
In September 2013, Attorney General Schneiderman gave a speech to the Bloomberg Markets 50 Summit outlining what he called Insider Trading 2.0 – the practice of providing preferred, technologically sophisticated traders with early access to market-moving information. In his remarks, in addition to noting that his office would investigate companies that engage in Insider Trading 2.0, the Attorney General encouraged industry leaders to step forward to help root out the practice. Providing an example for others, Business Wire voluntarily stepped forward and recently terminated its contracts with all known high-frequency traders.
Business Wire helps publicly traded companies distribute press releases and mandatory financial disclosures, and its information distribution platform is designed to simultaneously publish this data for subscribers – such as members of the media and others in the financial community. This is an important service for Business Wire’s clients, who must comply with reporting obligations under federal and state securities laws (including federal Regulation FD) that require market-moving information to be released to all market participants at the same time.
High-frequency trading firms were taking advantage of the split-second difference between the time when Business Wire released information directly to high-frequency traders and other subscribers and the time when various news aggregators (such as Bloomberg, Dow Jones, and others) were able to receive and then deliver that information to the market more broadly. During that time lag, which lasted just a fraction of a second, high-frequency trading firms were able to trade on the information ahead of, and at the expense of, other investors.
Today’s announcement that Business Wire will terminate sales to high-speed trading firms follows the agreement Attorney General Schneiderman reached last month with BlackRock, the world’s largest asset manager, to end its practice of systematically surveying Wall Street analysts for their sentiments on firms it covers in order to obtain advance information.
Last year, Attorney General Schneiderman announced his office’s agreement with Thomson Reuters to end its practice of selling early access to consumer confidence data to high-frequency traders, pending the Attorney General’s investigation into that matter.
The Attorney General’s Insider Trading 2.0 initiative is led by the Office’s Investor Protection Bureau.