Early Release of Sentiment Data Not Unlawful, But…


New York, NY- Last week, Thomson Reuters reached a settlement with New York’s Attorney General to halt the early delivery of consumer sentiment data to certain customers due to the growing public outcry news of this practice prompted.  As a result, many in the marketplace are actively debating whether this practice was appropriate or not.

Most Recent Development

Last Friday, Thomson Reuters released the University of Michigan Consumer Sentiment Index without providing an advanced 2 second peek to certain high frequency trading clients.  This was the result of a settlement between the market data vendor and the New York Attorney General.

After the release of Friday’s Consumer Sentiment Index, a mere 500 shares of the S&P 500 ETF traded in the 10 milliseconds following the release.  This compares to 200,000 shares which were traded in this ETF in the same 10 millisecond window following the July 13, 2012 release.

Historically, Thomson Reuters charged high frequency traders a premium to receive this information 2 seconds before the rest of their clients, whereas regular Thomson Reuters customers get a 5 minute jump on the general public.  Thomson Reuters pays The University of Michigan $1.0 mln for exclusive rights to distribute this data.

The New York Attorney General, Eric Schneiderman is considering whether to push Thomson Reuters to eliminate the 5 minute advanced look that regular clients get with this data.

Growing Industry Debate

News of this practice has prompted a widespread debate whether all investors should receive market moving information at the same time.

Today there are many data series, like the University of Michigan Consumer Sentiment Index, which are published by private entities that would not produce this information if they could not commercialize it by charging customers for access to it.  A few of these private data series include the Conference Board’s Consumer Confidence, Help Wanted, or Leading Indicators indices; Markit’s Purchasing Managers’ Indices; the Chicago Business Barometer; and data from the Institute for Supply Management.

While some argue that the practice of trading on market moving information before it becomes publicly available looks an awful lot like insider trading, most agree that both Thomson Reuters and their clients obtained this information legitimately, as the result of commercial arrangements with the lawful producers of the data.

However, the New York Attorney General Schneiderman is purportedly looking at whether Thomson Reuters’s practices violate the state’s Martin Act.  This act outlaws fraud, interpreted to mean “all deceitful practices contrary to the plain rules of common honesty.”  Thomson Reuters argues that no deceit was involved as it has always been upfront about its approach to disseminating this data.

Schneiderman has apparently undertaken a widespread investigation into the actions of a number of market data vendors in regards to the practice of selling early access to private data.

Violating the Spirit of the Law?

Some argue that even if Thomson Reuters’ actions do not break any existing laws, that the unlevel playing field established by the practice of allowing some investors to trade on market moving information not available to everyone violates the spirit of the law.

This philosophical view is reflected in recent years in legislators and regulators passing laws prohibiting securities fraud, the simultaneous release of government releases, and Regulation Fair Disclosure.  However, until now no one has required the simultaneous release of private data, even if it were deemed to be market moving.

New York Attorney General Schneiderman recently explained, “The reason America’s markets are the best and strongest markets in the world is that individuals always believed they could get a fair trade.  If you did your research well, you weren’t at a disadvantage because of information you couldn’t possibly access.  It wasn’t a rigged casino.”

Destroying Capitalism?

Others feel that swinging too far in the direction of “leveling the playing field by providing equal access to private data” could have extremely negative unintended consequences.

“The notion of a level playing field is important, and it’s important to aim for it,” said Harvey Pitt, former S.E.C. chairman and now the chief executive of the consulting firm Kalorama Partners. “But a level playing field can’t mean everyone has the same information. People need financial incentives to dig up information, and the marketplace benefits.”

He noted that the University of Michigan data moves markets because the university has years of experience and credibility behind it.  “People ought to be able to profit from their reputation for excellence,” he said. “If they can’t do that, we have destroyed capitalism in this country.”


Clearly many feel strongly about this topic with some coming down on the side of equal access to market moving data for everyone, while others feeling that incentives for private companies to produce valuable information needs to be protected.

We also would not be surprised if the New York Attorney General’s investigation reveals that a number of market data vendors have engaged in practices similar to what Thomson Reuters has done with the University of Michigan’s Consumer Sentiment Index.

Consequently, we suspect many in the financial services industry will watch this investigation with great interest.  Certainly, we intend to follow the developments in this case and keep our readers informed of the implications.



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