Hilarious corruption story hit the news wires this week. It's actually a two-part joke.
Part one is that Thomson Reuters got slapped in the face by New York State Attorney General Eric Schneiderman for its absurd practice of selling early access to the results of the consumer confidence survey it conducts each month in conjunction with the University of Michigan.
It turns out that in recent times, if you paid them an extra subscription fee of a few thousand dollars a month, Thomson Reuters would allow you access to the Consumer Confidence data a full two seconds earlier than the rest of its subscribers – at 9:54:58 a.m., as opposed to 9:55:00 exactly.
Thomson Reuters suspended the activity at the request of Schneiderman, who released a statement about this humorously brazen effort at the systematic sale of inside information. From the L.A. Times:
The consumer confidence data can move financial markets, and Scheiderman's office said "that two-second advantage is more than enough time for these traders to take unfair advantage of their early access to this information as they execute enormous volumes of trades in the blink of an eye."The two-second head start allows high-speed traders to plunge into the markets en masse and retreat all the way back again before most of the world sees this market-altering economic data. From a CNN report a few weeks ago:
“The securities markets should be a level playing field for all investors and the early release of market-moving survey data undermines fair play in the markets,” Schneiderman said Monday.
In the milliseconds before the survey is released to other paying clients at 9:55 a.m. ET, trading volumes can soar up to 20 times their normal levels. By 9:54:59 a.m. ET, long after computers have acted on the number, volumes have already returned to normal.As my friend Eric Salzman joked, the two-second head start is a scheme taken straight out of The Sting, where the "hook" was early access to the results of an out-of-state horse race. All that's missing is Robert Shaw placing his bet: "Five hundred thousand dollars to win. Lucky Dan!"