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November 04, 2014 at 05:17 AM
The two top senators on the Senate Banking Committee asked Securities and Exchange Commission Chairwoman Mary Jo White on Monday to explain how the SEC plans to remedy the “timing discrepancy” that allows private subscribers to electronic feeds of SEC data to see corporate filings before the public can.
In their letter to White, sent late Monday, Senate Banking Committee Chairman Tim Johnson, D-S.D., and Ranking Member Mike Crapo, R-Idaho, express their concern over a recent academic study showing that private subscribers to an SEC direct data feed could access filings an average of 40 seconds before they appeared on the SEC’s website, and markets began to respond to the news around 30 seconds before public posting.
For high-frequency traders and even financial newswires, who also use these services, 40 seconds is a huge advantage. In another example the study’s authors cited, Thomson Reuters allowed subscribers, for a fee, to access a consumer sentiment index two seconds early.
“This timing discrepancy gives an advantage to certain sophisticated trading firms,” the senators said, and “raises significant concerns regarding the management of the data systems that provide investors access to important, and potentially market-moving, information.”
Johnson and Crapo also cited comments made by White in a June 5 speech on equity market structure, in which White said that when looking at access to trading data “a related fairness concern is the latency difference between the direct data feeds and the consolidated feeds.”
The academic study shows “that a similar dynamic exists with respect to company filings with the SEC – certain investors are given access to real-time information before it is widely available.” This “unequal access,” the senators said, ”is even more troubling because it results from SEC-managed systems.”
