Comments on: The optics of selling financial information A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: dsquared Tue, 09 Jul 2013 17:56:35 +0000 Erratum – “selective disclosure” above should be “selective dissemination” of course.

By: dsquared Tue, 09 Jul 2013 17:54:31 +0000 Weeelllll …. when you say:

“FINRA members / broker-dealers are subject to more stringent rules about selective disclosure to favor some clients over others, which generally makes sense.”

you’re kind of agreeing that if Reuters was a FINRA member, then this policy would be very much the sort of thing that would look like it was falling foul of the selective disclosure rules. So I would disagree about “100% legal”. I’d save that designation for things like mowing your lawn, or buying a latte, or other stuff that’s definitely and unquestionably legal whoever does it.

I’d also disagree with you that “what really defines insider trading is misappropriation of information”. That’s true in the USA, but Americans all too often assume that this is because of a fundamental principle of fairness or market efficiency, whereas it’s actually a local quirk. Nearly everywhere else in the world, the offence is “market abuse” and the criterion is “material non-public information” – there’s nothing in there about where you got it.

So I’d say that Reuters were doing something that was heading for a gray area – it seems to me to be legal because the US law is how it is, and because Reuters isn’t a regulated provider of research. But … that’s what the Martin Act is for! New York State decided in the 1920s that it needed a catch-all provision for the attorney-general to go after financial scandals which didn’t break any statue law but which seemed a bit hinky.

This one … well, I don’t know what to make of it myself, but everyone, including many well-connected traders, was surprised. I think Schneiderman is firing a shot across the bows, to send the message that news is news and brokerdealing is brokerdealing, and that someone who wants to be treated as one should put a nice thick bar of clear blue water between their business model and that of the other.

By: KidDynamite Tue, 09 Jul 2013 17:33:58 +0000 Felix – should the NY AG shut down Seeking Alpha Pro too? w-york-attorney-general-shut-down-seekin g-alpha-pro/

if you say “no,” isn’t it ironic/conflicting/troubling/inconsisten t that you think it’s ok to have 24 hour advance release, but not two second advance release?

By: realist50 Tue, 09 Jul 2013 16:29:18 +0000 dquared – I will make a position much stronger than “it may look unfair but is technically legal.” This practice is absolutely 100% legal, and Schneiderman is a grandstanding fool, like seemingly every other New York AG. Is he going to try to make it illegal to short (or buy) a stock and then publicly disclose the reasons for doing so? Taken to its logical conclusion, Schneiderman’s position would raise all sorts of problems for any subscription-based investment research* or financial news. Matt Levine has a great piece making just this point at Dealbreaker.

The only decent argument I can see against this practice is rb6’s, about Michigan’s involvement, but that’s a decision to be made by the university with no legal relevance to Schneiderman.

A major underlying problem here is that public perception has been shaped by statements that the SEC and prosecutors make in insider trading cases. They go on and on about a “level playing field”, which actually has precious little to do with the legal theory of why insider trading is a crime. What really defines insider trading is misappropriation of information – i.e., if I’m an employee then I’m misusing information that belongs to my company (and ultimately its shareholders), and same idea about my client if I’m a lawyer or banker.

* I am speaking here of an independent provider of investment research. FINRA members / broker-dealers are subject to more stringent rules about selective disclosure to favor some clients over others, which generally makes sense.

By: KidDynamite Tue, 09 Jul 2013 12:48:58 +0000 Felix asked: “So what’s going on here?”

the answer is easy: grandstanding populist politicians…

By: dsquared Tue, 09 Jul 2013 06:22:31 +0000 I agree with the poster above; if the defence of this practice is “well, it may look extremely unfair but it is technically legal”, then it requires a bit of chutzpah to complain of Eric Schneiderman that he’s prosecuting it under a use of the Martin Act which may look unfair, but which is technically legal.

By: Woltmann Tue, 09 Jul 2013 01:25:00 +0000 Good thing astuteness in’t taken into account or you would be paying the pot $ f. How much do I have to pay for .005 secs from U of Idaho? Really?

By: BidnisMan Mon, 08 Jul 2013 22:53:40 +0000 High frequency trading is legal but morally wrong. The fact that a politician goes after it using ‘unfair’ yet also legal methods is pot and kettle behavior.

By: qatenary Mon, 08 Jul 2013 20:26:33 +0000 The multi-billion-dollar market in financial information is headed for drastic change, one way or another. It’s not lawsuits or regulators that will reshape it; it’s competition from free alternatives.

The entire financial data industry was built in an era where the act of collating, cleaning and distributing information was tedious, labor-intensive and difficult. That era is ending. High-quality financial data has never been more easily available. When your business model is built on the scarcity of a resource and that resource suddenly becomes ubiquitous, you’ve got a problem.

The incumbents — Reuters, Bloomberg and others — have responded to this problem by proactive copyrighting, by placing strict limits on what subscribers can do with their data, and by various tiered dissemination models. Some of these may prove sustainable. Most will not.

Interesting times ahead — that’s for sure!

(See for a fuller version of the argument above).

By: rb6 Mon, 08 Jul 2013 20:19:16 +0000 I take your point, but there is something unseemly about a state supported public institution “selling” the right for selected individuals to profit from information at the expense of others. No doubt the University of Michigan is acting within its legal rights as well, it’s just a reminder that the public pays for things one way or another. Seriously, UM should at least consider cutting out the middle man.