A.G. Schneiderman Announces Unprecedented Steps By News Distribution Firm To Curb Preferential Access For High-frequency Traders
Agreement With PR Newswire Is Latest Effort To Prevent Insider Trading 2.0, Practices That Result In Elite Traders Gaining Unfair Advantage Over Rest Of Market
Schneiderman: PR Newswire’s Industry-Leading Actions Help Restore Confidence In Markets And Protect The Investing Public
NEW YORK—Attorney General Eric T. Schneiderman today announced that PR Newswire, a leading news distribution and reporting firm, has agreed to require its direct data feed recipients to certify that they will not engage in high-frequency trading when using direct feeds of the information PR Newswire distributes on behalf of its clients. PR Newswire also agreed to counsel its customers that wish to release information upon the close of the markets to do so after 4:00:00 p.m., to ensure that high-frequency traders do not have the ability to trade on the news in the milliseconds after the closing bell. Today’s announcement follows agreements earlier this year between the Attorney General and Business Wire and Marketwired, each of which agreed to stop providing similar market-moving data to high-frequency traders.
“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 Attorney General Schneiderman. “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.”
PR Newswire provides an information distribution platform designed to help companies distribute press releases and other mandatory disclosures to the broad market. While PR Newswire had previously declined to provide its primary direct data feed to high-frequency traders, today’s agreement turns that practice into a formal policy at the company, and requires PR Newswire’s customers to certify annually that the direct data feeds they receive will not be used for high-frequency trading.
As part of today’s agreement with the Office of the Attorney General, PR Newswire also adopted a first-in-the-industry policy to counsel clients to delay “4:00 p.m.” releases, which are intended to be released upon the close of the market, so as not to influence trading. Because certain securities exchanges, including NASDAQ, allow trading to continue for milliseconds beyond the 4:00 p.m. closing time, these close-of-market releases sometimes give high-frequency traders an edge that they can exploit in the milliseconds after 4:00 p.m. Following discussions with the Office of the Attorney General, PR Newswire has adopted a policy to counsel clients that it is best to issue releases at 4:01 p.m., if the company’s intent is to make the release after the close of the markets.
Ninan Chacko, CEO of PR Newswire, said, “Since our inception, we have taken a proactive approach to establishing practices that supply material news to investors and the general public equitably. Today’s steps solidify our industry-leading position promoting fair access to market-moving information.”
This agreement is part of Attorney General Schneiderman’s efforts to end Insider Trading 2.0 – the practice of providing preferred, technologically sophisticated traders with early access to market-moving information. In March, Attorney General Schneiderman delivered a speech at New York Law School calling for regulators, stock exchanges, and other trading venues to curb arrangements that cater to high-frequency trading firms. Last summer, Attorney General Schneiderman announced an agreement with Thomson Reuters to end its practice of selling early access to consumer confidence data to high-frequency traders. Earlier this year, Attorney General Schneiderman also announced an agreement with BlackRock to end its global analyst survey program after an investigation revealed that a number of questions were worded to capture analysts’ unpublished views regarding management, competitive position, earnings, and other aspects of covered companies. As part of that investigation, Attorney General Schneiderman announced that his office has secured interim agreements with 18 major financial firms to discontinue or to continue refraining from the practice of responding to such surveys and to continue their cooperation with the Attorney General’s investigation into the early release of analyst sentiment.
The Attorney General’s Insider Trading 2.0 initiative is led by the Office’s Investor Protection Bureau.