High speed traders are Wall Street's ugly ducklings. They have come under fire for using sophisticated computer technology to game the market. Now one of the regulators overseeing them may actually be helping the rapid traders, according to a study released Friday by researchers at Columbia University in New York.
The study found that for around $15,000 U.S. per year, the Securities and Exchange Commission's data feed delivers company filings to subscribers about 10 seconds ahead of when the filings first appear on the agency's website.
The filings often contain market moving information on such things as acquisitions, corporate financial health, and executive stock holdings.
Ten seconds doesn't sound like much in the real world, but that time gap is huge considering high frequency trading firms reap profits by moving in and out of stocks in milliseconds.
While it's tough to know for sure if high speed traders act on the early data, the researchers discovered "abnormal trading volume" in the seconds after the paying clients received it.
The SEC says it's reviewing the Columbia study as well as a working paper by a team at the University of Chicago and University of Colorado, which did a did similar analysis using data going back to 2012 and got comparable results.
Earlier this year, Businesswire, a company that distributes corporate press releases, announced it will no longer sell a direct feed that injected news releases directly into high speed trading companies' internal systems.
And last year, under pressure from New York Attorney General Eric Schneiderman, Thomson Reuters decided to stop selling certain economic data to fast traders two seconds before the public saw it.
But the fact that the SEC is involved adds a new layer of concern.
