SEC Found To Be Assisting High Frequency Traders

As they say, you couldn’t make this stuff up!

The Wall Street Journal reported today (October 29, 2014) that a new study confirms that the Securities and Exchange Commission (SEC) is feeding information to high frequency traders (HFT) before it goes to the general investment public.  What?  Could you say that again?

Yes, it’s true.  Your SEC — the U.S. government agency tasked with assuring a fair and efficient securities marketplace — provides special information access to favored investors, including the much ballyhooed high frequency traders.  Read about it here in this article: Fast Traders Are Getting Data From SEC Seconds Early.

The Journal reports that:

Hedge funds and other rapid-fire investors can get access to market-moving documents ahead of other users of the Securities and Exchange Commission’s system for distributing company filings, giving them a potential edge on the rest of the market.  Two separate groups of academic researchers have documented a lag time between the moment paying subscribers, including trading firms, newswires and others, receive the filings via a direct feed from an SEC contractor and when the documents are publicly available on the agency’s website….

When a company submits a document, the contractor forwards it to the Edgar subscribers and to the SEC website “at the same time,” according to the SEC. But the studies suggest that the SEC website can take anywhere from 10 seconds to more than a minute to post the documents, giving an advantage to the Edgar subscribers or their customers, who are often professional investors. Mom-and-pop investors can download the documents from the SEC website, but the information may already be known to others in the market, the studies indicate….

[A] forthcoming paper will document that investors could make about several cents a share, on average, on market-moving filings by receiving it in advance of those who rely on grabbing the document from the SEC website.

Straight Arrow

October 29, 2014

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  1. Pingback: How the SEC Helps High Frequency Traders (Redux) | Securities Diary

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