Apr 30, 2014
The Right Thing to Do, From Any Angle: Curbing HFT Advantage
I used to live across the street from a fellow who worked for a hedge fund, writing software code designed to machine-read data and execute stock trades in hundredths of a second. One night, as we were standing out by our mailboxes chatting, we realized that our jobs intersected, an interesting conversation ensued.
We had been talking about emerging news feed formats and the fact that he had figured out how to write code that could machine-read the news announcements about the macroeconomic events of the day (e.g. jobs reports, durable goods orders, etc.) and execute trades based upon that data – automatically and in the blink of an eye. Our conversation soon turned towards his interest in getting access to our news feeds.
I bring this up because this conversation was similar to one of the many discussions our leaders have had here at PR Newswire over the past decade. We’ve had ample opportunity to sell our direct feed to high frequency trading outfits, and have evaluated doing so through many different lenses. And our answer has always been no. Today, we received some powerful affirmation from the New York Attorney General that we continue to do the right thing.
“By going the extra mile to ensure its service is not abused by high-frequency traders – at any time during the trading day and in the moments after the closing bell – PR Newswire has proven itself to be an industry leader,” said New York Attorney General Schneiderman in a press release issued today about the steps PR Newswire is taking to curb preferential access to material news for high frequency trading firms. “High-frequency traders can use information in the milliseconds before it becomes widely available to other investors, effectively skimming from the rest of the investing public. Today’s agreement is another important step toward curbing Insider Trading 2.0, and PR Newswire deserves credit for its leadership.”
The discussion about high speed trading tactics is far from over. Numerous federal agencies, including the SEC and the Justice Department, are investigating whether HFT practices violate insider trading laws. In the meantime, PR Newswire is expanding on its long-standing approach to fair and equitable distribution, taking additional measures to protect client and market interests by recommending that public companies disclosing material news at market close delay those announcements until 4:01PM ET to prevent same-day trading on this information.
In the wake of all the developments around HFT tactics recently, I reached out to my old neighbor, who left the trading business several years ago and now writes code for a security firm.
“I think it’s great that you guys didn’t sell your feed to the highest bidder, even if at the time I was trying to be one of your highest bidders,” he told me. “You did always have the long-game in your perspective, and that’s admirable.”
Building Shareholder Confidence: New York Attorney General announces unprecedented steps by PR Newswire to curb High Frequency Traders
USA Today: PR Newswire Curbs High Speed Trading
Bloomberg BusinessWeek: PR Newswire Reaches Deal With New York in High-Frequency Trading Probe