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The Financial Times has an article today called “Greece reaches agreement with ‘troika’ on bailout tranche” and I’m not going to tell you about it but you can go read it if you want. If you’re an FT subscriber just click on this link and there you are. If not, maybe try typing that title into Google and clicking on the first result you get; that’ll probably work, no guarantees. Or, like, go buy a copy of the paper?
That’s the way a lot of news works: if you have an internet connection and a desire to get it, you probably can, but if for idiosyncratic reasons you want to get it quickly and reliably – say, you invest in Greek debt and need to know what’s going on for trading purposes – the way to do that is to pay for it. As a corollary, the way to get more of it more quickly and reliably is to pay more for it. If you clicked that link and you’re not a subscriber you probably saw something like this:
If you just pay for the standard version, you get the news. For an extra $121 a year, you also get Lex, which “helps readers make better investment decisions by highlighting key emerging risks and opportunities.” This may or may not be a sensible trade for you: if that advertising is right, and Lex helps you make better investment decisions, and you’re actually, y’know, making investment decisions, then making one or two better investment decisions a year is easily worth $121, so there you go. Really you can’t afford not to get the premium online access. I’m sure the ePaper is nice too.
Anyway the Attorney General of the State of New York wants to make that illegal.
I mean ha ha ha no of course not that would be crazy right? We have the First Amendment in this country, which probably applies to the FT even though they’re British, so government officials can’t just go around tweaking their paywall policies. But:
Thomson Reuters Corp. has decided to stop giving an elite group of investors an early peek at the results of a market-moving consumer-confidence survey from the University of Michigan after regulators in New York began looking into the arrangement.
Thomson Reuters said late Sunday that it would temporarily suspend its practice of giving top-paying subscribers a two-second advance notice of the survey’s results while the New York attorney general conducts an investigation of the arrangement.
“Thomson Reuters is fully cooperating with the N.Y. Attorney General’s review and made this change voluntarily at the request of the Attorney General,” the company said in a statement late Sunday.
Oh but see it’s okay because this is news that people use for trading purposes, and it’s important for market integrity that no one get unfair access to anything that would help them make better investment decisions than anyone else. Except Lex I mean! I dunno.
Here in America we’re generally pretty into letting news organizations decide how they want to distribute and charge for their news, and we’re generally less into letting government officials supervise those decisions, but some of that First-Amendment wariness goes a bit out the window when the securities laws are involved.1 Here, though, the securities laws are not involved:
Legal experts have said the tiered pricing arrangement Thomson Reuters has with its customers does not violate federal insider trading laws. As a nongovernment entity, the company can disseminate the information as it pleases, as long as it fully discloses the practice, they say. And trading on the early data release is also legal because no one is breaching any duty in leaking the information, as is the case in a classic insider trading crime when a company executive divulges corporate secrets.
We talked last month about this two-second advanced notice of the consumer confidence data and I guess I’m with the legal experts? After all, the news at issue here is not inside information: it’s just a privately conducted poll where researchers ask a bunch of people how they feel about the economy.2 It’s super duper outside information, collected by people in the information-collecting business and then sold to people who want to read it. Y’know, news.
But that’s okay because New York has other, better, vaguer laws:
But Mr. Schneiderman’s office is exploring whether the advanced look at the consumer data is a violation of the Martin Act, a state securities-fraud law that gives the attorney general broad powers to pursue either criminal or civil actions against companies. The nearly century-old law does not require the government to show proof that a company intended to defraud anyone. It also allows investigators to seek an enormous amount of information from businesses. … After Thomson Reuters resisted making the change, the attorney general’s office threatened to seek a court order to stop it from prereleasing the data, this person said. Rather than wage a court battle, Thomson Reuters capitulated and agreed to temporarily suspend the practice for the duration of the investigation.
So the New York attorney general doesn’t like how a news organization prices and distributes its news, even though that pricing and distribution does not appear to violate the securities laws, and so he used his power “to seek an enormous amount of information” from that organization to bully it into accepting his restrictions on how it sells its news. That’s weird, no? If it was selling that news to someone other than high-frequency traders, wouldn’t the conversation about this be different?3
1. Consider, for instance, those poor dopes at Bulldog Investments, who just want to be able to tell everyone about their hedge funds instead of only marketing to accredited investors. Bulldog: advertise with us!
2. You might ponder questions like, how much would it cost to just do an identical poll yourself, but a day earlier? (Note Michigan charges Reuters $1.1 million per year, and presumably makes a profit.) How closely would your poll track the Michigan poll? What if yours was more “right” than the Michigan poll? Would you rather be right or track the Michigan poll? What would happen if you wanted to sell the results of your poll to hedge funds or whatever?
Thomson Reuters has several other arrangements to distribute economic data from nongovernmental organizations to traders.
For example, it pays the Institute for Supply Management a fee to distribute a closely-followed survey of manufacturers to investors willing to pay Thomson Reuters about $2,000 a month, plus the $1,025 monthly for a high-speed connection if they don’t already have it.
A spokesman for Thomson Reuters said Sunday’s announcement regarding its arrangement with the University of Michigan does not apply to its other agreements.
Well but obviously it’s terrifically important for market fairness that the Michigan consumer confidence survey go out to everyone at the same time, but not the ISM. Or … it’s not possible that this is about something other than creating the best possible financial markets is it?