Nov. 7 (Bloomberg) — Investors who pay for access to a faster pipeline of U.S. corporate filings, including earnings disclosures, stand a good chance of making more money than other traders, according to Columbia University researchers.
Subscribers paying $15,000 a year for the direct feed got data from Securities and Exchange Commission filings known as 8-Ks on average 89 seconds before the information was posted to the agencys website, Robert Jackson Jr. and Joshua Mitts said in their study. Trading on the early data could yield returns that were .015 percentage points higher on positive news and .026 percentage points higher on negative news, they said.
The findings largely confirm those in a paper released last month that found evidence of a two-tiered system for distributing filings. While that research focused on corporate insiders buying and selling stock, Jackson and Mitts also examined other market-moving disclosures including earnings, merger agreements and changes in top executives.
The SECs method for distributing filings containing market-moving information favors speedy traders, they wrote.
Distribution of U.S. financial information has been a flashpoint in debate over high-frequency traders, electronic firms that have supplanted human market makers and account for as much as half of all stock trades. New York Attorney General Eric Schneiderman began an investigation this year into whether the fastest traders get advantages unavailable to others.
U.S. Senators Tim Johnson and Mike Crapo have called on SEC Chair Mary Jo White to correct the disparity turned up in the earlier study, which first became public on Oct. 29. The SEC said last month its reviewing how the data is disseminated by a contractor, Attain LLC, that manages the system. John Nester, an SEC spokesman, said today the agency is reviewing the latest study.
The disparity between the private feed and the appearance of data on the SECs website has narrowed since it was first made public in media reports, Jackson and Mitts wrote.
