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

Thomson Reuters to Suspend Early Peeks at Key Index (DealBook)
Thomson Reuters Halts Early Peeks At Consumer Data (WSJ)
Greece reaches agreement with ‘troika’ on bailout tranche (FT)

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?

3. Also fun is that:

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?

22 comments (hidden to protect delicate sensibilities)
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Comments (22)

  1. Posted by Sssssss | July 8, 2013 at 10:14 AM

    "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?"

    No, not at all.

    - Spitzer, Cuomo, etc……

  2. Posted by Common Sense | July 8, 2013 at 1:54 PM

    Who gets to call themselves a "news organization"? Can Goldman's equity research analysts rebrand themselves as journalists, and the sell hedge funds early access to market moving "private" reports? Well, if Reuters gets to profit from such a practice, why can't the banks?

    The reality is that journalists need to play by the same rules as other market participants, and hiding behind your media badge so that you can profit from illicit conduct is shameful, and puts your Reuters in the same camp as brokers who allow clients to read analyst research that is to be published tomorrow.

  3. Posted by give me a break | July 8, 2013 at 1:59 PM

    So media companies get to play be different rules. Why don't we all just brand ourselves as "news organizations" the way Bloomberg and Reuters have, even though most of their profits come from selling terminal subscriptions to wall street? Front–running is front-running. Your defense of the practice of facilitating front-running by self-described "media cos" is weak.

  4. Posted by ih8edjfkjr | July 8, 2013 at 2:13 PM

    Actually, yes. They just can't sit inside GSCO or GSEC. Any non-FINRA member, including GSAM, can sell news, data or research on a tiered or prioritized basis.

  5. Posted by give me a break | July 8, 2013 at 2:16 PM

    Your defense of Reuters is not credible. Reminds me of others who defend insider trading as a victimless crime, which it is not.

    Media companies that straddle the line between research provider, news outlet, and broker-dealer (see Bloomberg's trading business) are no less conflicted than the investment banks.

  6. Posted by lucas | July 8, 2013 at 3:15 PM

    Is Reuters a broker-dealer? No? Then shut the fuck up.

  7. Posted by Guest | July 8, 2013 at 4:08 PM

    You could have given everyone here a break and either 1) not have posted anything at all 2) posted something less stupid 3) killed yourself, perchance the best solution.

  8. Posted by Do your own homework | July 8, 2013 at 4:33 PM

    Seriously dude? If you want this data early, do your own survey. This has nothing to do with insider information: it's literally going around, asking a bunch of jerks off the streets to talk about their feelings. Reuters can sell it whomever they want under whatever circumstances they like. The AG is just doing some populist grandstanding here for people who should be investing, not trading.

  9. Posted by RealDeal | July 8, 2013 at 4:52 PM

    Inside information is like pornography. You know it when you see it. All the twisted arguments made in this article take nothing away from the simple fact that Reuters is selling early looks at data they know will move the markets. Does premium content from the FT move the markets? Obviously not. Enough said. Hiding behind its media credentials doesn't make Reuters market abuses any more tolerable than if such front running were facilitated by an investment bank for its select clients.

  10. Posted by Marissa Mayer | July 8, 2013 at 5:40 PM

    I've said it once before and I will say it again. ALL of these problems would go away if we required people to use only Yahoo! Finance for their information. Level. Playing. Field.

    #amirite?

  11. Posted by Do your own homework | July 8, 2013 at 5:42 PM

    Can I at least use whatever random moron has a forbes.com blog this week?

  12. Posted by Do your own homework | July 8, 2013 at 5:49 PM

    Again, go do your own survey. Nothing's stopping you; it's not even hugely expensive (~$1M/yr, and you can probably skimp and use a smaller sample size). Reports about random idiots' feelings are not insider information. Looks like somebody failed their Series 7 and CFA 1.

  13. Posted by Anonymous | July 8, 2013 at 5:59 PM

    Has common sense vanished altogether? This makes about as much sense as the hedge funds becoming major advertisers at some of our esteemed sporting events.

  14. Posted by Two seconds to glory | July 8, 2013 at 6:11 PM

    Sounds right this is First Amendment protected behavior. It also stinks. Here's why. The two second advantage is clearly a product for a certain kind of firm – high speed traders. Reuters knows a two second advance look is enough for those firms to profit. The firms know it too. So the product and the advantage are available only to a certain group uniquely able to profit from it. Given the strategies in play to profit from that two second advantage, profits are zero sum. So an advantage is for sale to a group of firms uniquely and exclusively able to profit from it at everyone else's expense. Yeah, might be legal. Stinks though.

  15. Posted by common sense | July 8, 2013 at 8:39 PM

    Its not legal. Legal "experts" paid by the very same media companies like Dow Jones, Bloomberg, and Reuters deeming it legal in order to get quoted in some self-serving story is hardly definitive. Fact is insider trading determined is always on a case by case basis, and while media companies have broad latitude in their reporting, given early looks to paid subscribers at data known to be market moving for the express purpose of front running is pretty blatantly illegal. I'd say this is pretty much the definition of a conspiracy. Again, just because a crook is wearing a media badge doesn't make him less of a crook.

  16. Posted by UBSSAM | July 8, 2013 at 10:03 PM

    If I give it away, would someone pick it up?

  17. Posted by Guest | July 8, 2013 at 10:06 PM

    Watch your mouth, son.

    - U.S. Electoral College

  18. Posted by Everyone | July 8, 2013 at 11:18 PM

    You are an idiot who doesn't know what insider trading actually is.

  19. Posted by Libre | July 9, 2013 at 1:35 AM

    Pathetic. If the definition of insider information is "any information that might move a security," then the concept can't be said to have any validity at all.

    See: Jonathon Lebed, et alii.

  20. Posted by Reggie Dunlop | July 9, 2013 at 10:39 AM

    We got the point when you posted the first time as "Common Sense", and you didn't really add any weight to your arguments when you posted as "give me a break" twice or as "RealDeal" or "common sense" the second time. Now get back to work, Mr. Schneiderman.

  21. Posted by Anderson | September 20, 2013 at 12:17 AM

    Hi Matt Levine,
    your New York Attorney General Will Supervise When And How News Organization Can Report News is very interesting to me. I got little idea from your articel

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