12 ms·

I don't understand on what legal basis the SEC could force Reuters to stop selling the information to different people at different times. Reuters is simply no

by JackFr 13y ago

I don't understand on what legal basis the SEC could force Reuters to stop selling the information to different people at different times. Reuters is simply not under their jurisdiction, and the University of Michigan Survey is not a public good, which everyone is entitled equal access to. On the other hand, the SEC could forbid registered entities from buying the survey before it is generally available. More importantly, I think Taibbi's outrage is misplaced - I don't see a victim here.

dhimes 13y ago
I guess the only problem could be if they limited who was allowed to buy the advance information. It just looks like a premium service to me.
- pmorici 13y ago
  The problem as pointed out in the article is that they didn't disclose that they are doing this to their lower tier customers. It looks like it only became public knowledge once the excerpt from the contract specifying the three tiers was included in the wrongful termination lawsuit.
  - dhimes 13y ago
    I totally missed that. Thank you; I agree that should be corrected.
kcorbitt 13y ago
It might be illegal and would definitely be unethical if the subscribers to the lower tier don't even know that a higher tier exists. They would be buying access on the presumption that everyone else were getting the data at the same time. If enough sufficiently large investors receive the data earlier the lower-tier subscribers won't get much benefit from their subscription at all.
deleted 13y ago
[deleted]
cynicalkane 13y ago
Economists differ, but it's generally believed that tiered access to public information is a bad thing. It's one thing for algos to act faster on information that everyone gets, when everyone knows this is happening, because they can avoid suffering the worst of the information disadvantage--but it's another thing entirely if the public doesn't know about the information disadvantage. So I think this is against the spirit of public markets as it is generally understood in America. But it should also be pointed out that, as usual, the average individual investor shouldn't be speculating on these numbers in the first place. This is yet another instance of professionals harming professionals.
- javert 13y ago
  One of the fundamental, positive properties of markets is that there is information assymetry (i.e., "information disadvantage") in your language. When there is too much information assymetry about something, it gets reflected in the price. That is also part of the economic power of markets. So I disagree that this is against the "spirit of public markets." In addition, it's certainly against the American spirit to have government nannies bossing people around. Let free people interact in the market... there is no need for this.
  - cma 13y ago
    "Free people" in this case includes the government-funded Michigan University.
    - JackFr 13y ago
      And yet they brazenly make me pay a premium to my cable provider for the Big Ten Network if I want to see their football games...
    - javert 13y ago
      That's a separate issue. I am not a proponent of the government-sponsored education bubble.
  - cynicalkane 13y ago
deleted 13y ago
[deleted]
DannoHung 13y ago
The problem isn't that some customers are given first access, it's that they are given secret first access. If Reuters had made it widely known that the report would be issued to customers in a higher tier first, this wouldn't be a problem. The fact that they were giving it out to certain customers first without telling others that they were going to be getting it later is the material issue. They were, fundamentally, helping create inside information for certain customers and creating an opportunity to exploit other investors who would be unknowingly trading with an information gap. Even though the report was going to be widely disseminated, getting it ahead of other people without them knowing allows for you to create a huge market advantage for yourself if you know those other people are going to be trading on the same information shortly.
- yummyfajitas 13y ago
  Yes, doing research and gathering information does give you a huge market advantage. That's not the same thing as inside information, which is privileged information given to you by a corporate insider with a fiduciary duty to all shareholders.
  - ihsw 13y ago
    The difference isn't nearly as cut-and-dry as you think, especially since a variety of regulatory institutions have varying rules between them. Some jurisdictions cast a very wide net so that even associates and family members are included. Since this debacle is approaching world-wide proportion then the impact will be similarly global.
  - phyalow 13y ago
    It's a grey area - Mosaic theory stipulates that material information gleaned superior analysis of public non material information is itself classifiable as public and non material (ie not inside information)!
jzwinck 13y ago
Can you explain how the "Survey is not a public good"? It is rivalrous only at the second order (people compete to trade based on it), but non-rivalrous in itself (everyone can get the news). Other facts regarding its "public" nature are that the University of Michigan is a public university, with substantial taxpayer funding, and the Survey was initially funded by the Fed [1] (without which, it might not have the cachet it enjoys today). [1] http://www.ipr.northwestern.edu/publications/docs/workingpapers/2003/IPR-WP-03-10.pdf http://www.ipr.northwestern.edu/publications/docs/workingpap...
- JackFr 13y ago
  To quote Wikipedia: "a public good is a good that is both non-excludable and non-rivalrous" "a good or service is called excludable if it is possible to prevent people (consumers) who have not paid for it from having access to it." If the Michigan Survey were non-excludable, we wouldn't be having this exchange. While you might argue that upon general availability through the media it is non-excludable, the excludability of the timely access is at the very heart of the issue. The argument that the University of Michigan is a public institution has some merit, however the onus is on you to suggest a legal argument for the Federal Government to compel the regents and trustees to behave in a manner contrary to what they would have done otherwise.
  - jzwinck 13y ago
    Fair points. Wikipedia'a Public Good article shows at the top a fireworks display as an example. This is interesting because most large fireworks displays I've seen do offer a small number of viewers the ability to watch from nearby (i.e. to obtain more-privileged access) in exchange for money. So non-excludability may not be complete and absolute: a "public good" may be available to all comers, but also available in an enhanced form for pay. Similarly with outdoor concerts having VIP seating, parades, and so on. In the end this is a semantic issue and we can probably agree that the language is not precise enough to succinctly describe what's going on with the Survey now. But perhaps the examples above are illustrative enough, as I have rarely heard complaint about the visible existence of ticketed/VIP seating at public events. Some others here claim the Survey's dissemination would not be objectionable if it were done in a more transparent fashion (but still in tiers for pay). Finally, it's interesting that this particular news item has such a "long" advantage period for paying customers. Two seconds is a long time for computers, and even if the Survey were released "simultaneously" to everyone, those who paid to build better networks and systems to use it would still benefit. The end result might be similar, only without the extra rents paid to Reuters. If Reuters and UMich argued that without these rents the Survey could not be produced at all, I wonder if it would calm the critics.
ballard 13y ago
The victim is everyone else that doesn't have access, something the SEC attempts to level the jungle. Winning in stock market is all about access to intelligence. If you have money, you may be able to buy it... if you have power, people try to give it to you (paying for it is stupid). Fiction sums it up best: "Public’s out there throwing darts at a board, sport. I don’t throw darts at a board, I bet on sure things. Read Sun Tsu's The Art of War ‘every battle is won before it's fought.’ Think about it. You are not as smart as I thought you were, buddy boy. You wonder why fund managers can’t beat the S&P 500, cause they’re sheep and sheep get slaughtered. I’ve been in the business since ’69 most of these Harvard MBA types don’t add up to dog shit. Give me guys that are poor, smart, and hungry and no feelings. You win a few you lose a few but you keep on fighting. If you need a friend, get a dog. It’s trench warfare out there, pal." http://www.imdb.com/title/tt0094291/ http://www.imdb.com/title/tt0094291/
goombastic 13y ago
I think the government response to this should be to delay the feed to reuters by 2 seconds or whatever penalty time they feel like tacking on.

by JackFr 13y ago

dhimes 13y ago

I guess the only problem could be if they limited who was allowed to buy the advance information. It just looks like a premium service to me.

pmorici 13y ago
The problem as pointed out in the article is that they didn't disclose that they are doing this to their lower tier customers. It looks like it only became public knowledge once the excerpt from the contract specifying the three tiers was included in the wrongful termination lawsuit.
- dhimes 13y ago
  I totally missed that. Thank you; I agree that should be corrected.

kcorbitt 13y ago

It might be illegal and would definitely be unethical if the subscribers to the lower tier don't even know that a higher tier exists. They would be buying access on the presumption that everyone else were getting the data at the same time. If enough sufficiently large investors receive the data earlier the lower-tier subscribers won't get much benefit from their subscription at all.

deleted 13y ago

[deleted]

cynicalkane 13y ago

Economists differ, but it's generally believed that tiered access to public information is a bad thing. It's one thing for algos to act faster on information that everyone gets, when everyone knows this is happening, because they can avoid suffering the worst of the information disadvantage--but it's another thing entirely if the public doesn't know about the information disadvantage. So I think this is against the spirit of public markets as it is generally understood in America. But it should also be pointed out that, as usual, the average individual investor shouldn't be speculating on these numbers in the first place. This is yet another instance of professionals harming professionals.

javert 13y ago
One of the fundamental, positive properties of markets is that there is information assymetry (i.e., "information disadvantage") in your language. When there is too much information assymetry about something, it gets reflected in the price. That is also part of the economic power of markets. So I disagree that this is against the "spirit of public markets." In addition, it's certainly against the American spirit to have government nannies bossing people around. Let free people interact in the market... there is no need for this.
- cma 13y ago
  "Free people" in this case includes the government-funded Michigan University.
  - JackFr 13y ago
    And yet they brazenly make me pay a premium to my cable provider for the Big Ten Network if I want to see their football games...
  - javert 13y ago
    That's a separate issue. I am not a proponent of the government-sponsored education bubble.
- cynicalkane 13y ago

deleted 13y ago

[deleted]

DannoHung 13y ago

The problem isn't that some customers are given first access, it's that they are given secret first access. If Reuters had made it widely known that the report would be issued to customers in a higher tier first, this wouldn't be a problem. The fact that they were giving it out to certain customers first without telling others that they were going to be getting it later is the material issue. They were, fundamentally, helping create inside information for certain customers and creating an opportunity to exploit other investors who would be unknowingly trading with an information gap. Even though the report was going to be widely disseminated, getting it ahead of other people without them knowing allows for you to create a huge market advantage for yourself if you know those other people are going to be trading on the same information shortly.

yummyfajitas 13y ago
Yes, doing research and gathering information does give you a huge market advantage. That's not the same thing as inside information, which is privileged information given to you by a corporate insider with a fiduciary duty to all shareholders.
- ihsw 13y ago
  The difference isn't nearly as cut-and-dry as you think, especially since a variety of regulatory institutions have varying rules between them. Some jurisdictions cast a very wide net so that even associates and family members are included. Since this debacle is approaching world-wide proportion then the impact will be similarly global.
- phyalow 13y ago
  It's a grey area - Mosaic theory stipulates that material information gleaned superior analysis of public non material information is itself classifiable as public and non material (ie not inside information)!

jzwinck 13y ago

Can you explain how the "Survey is not a public good"? It is rivalrous only at the second order (people compete to trade based on it), but non-rivalrous in itself (everyone can get the news). Other facts regarding its "public" nature are that the University of Michigan is a public university, with substantial taxpayer funding, and the Survey was initially funded by the Fed [1] (without which, it might not have the cachet it enjoys today). [1] http://www.ipr.northwestern.edu/publications/docs/workingpapers/2003/IPR-WP-03-10.pdf http://www.ipr.northwestern.edu/publications/docs/workingpap...

JackFr 13y ago
To quote Wikipedia: "a public good is a good that is both non-excludable and non-rivalrous" "a good or service is called excludable if it is possible to prevent people (consumers) who have not paid for it from having access to it." If the Michigan Survey were non-excludable, we wouldn't be having this exchange. While you might argue that upon general availability through the media it is non-excludable, the excludability of the timely access is at the very heart of the issue. The argument that the University of Michigan is a public institution has some merit, however the onus is on you to suggest a legal argument for the Federal Government to compel the regents and trustees to behave in a manner contrary to what they would have done otherwise.
- jzwinck 13y ago
  Fair points. Wikipedia'a Public Good article shows at the top a fireworks display as an example. This is interesting because most large fireworks displays I've seen do offer a small number of viewers the ability to watch from nearby (i.e. to obtain more-privileged access) in exchange for money. So non-excludability may not be complete and absolute: a "public good" may be available to all comers, but also available in an enhanced form for pay. Similarly with outdoor concerts having VIP seating, parades, and so on. In the end this is a semantic issue and we can probably agree that the language is not precise enough to succinctly describe what's going on with the Survey now. But perhaps the examples above are illustrative enough, as I have rarely heard complaint about the visible existence of ticketed/VIP seating at public events. Some others here claim the Survey's dissemination would not be objectionable if it were done in a more transparent fashion (but still in tiers for pay). Finally, it's interesting that this particular news item has such a "long" advantage period for paying customers. Two seconds is a long time for computers, and even if the Survey were released "simultaneously" to everyone, those who paid to build better networks and systems to use it would still benefit. The end result might be similar, only without the extra rents paid to Reuters. If Reuters and UMich argued that without these rents the Survey could not be produced at all, I wonder if it would calm the critics.

ballard 13y ago

The victim is everyone else that doesn't have access, something the SEC attempts to level the jungle. Winning in stock market is all about access to intelligence. If you have money, you may be able to buy it... if you have power, people try to give it to you (paying for it is stupid). Fiction sums it up best: "Public’s out there throwing darts at a board, sport. I don’t throw darts at a board, I bet on sure things. Read Sun Tsu's The Art of War ‘every battle is won before it's fought.’ Think about it. You are not as smart as I thought you were, buddy boy. You wonder why fund managers can’t beat the S&P 500, cause they’re sheep and sheep get slaughtered. I’ve been in the business since ’69 most of these Harvard MBA types don’t add up to dog shit. Give me guys that are poor, smart, and hungry and no feelings. You win a few you lose a few but you keep on fighting. If you need a friend, get a dog. It’s trench warfare out there, pal." http://www.imdb.com/title/tt0094291/ http://www.imdb.com/title/tt0094291/

goombastic 13y ago

I think the government response to this should be to delay the feed to reuters by 2 seconds or whatever penalty time they feel like tacking on.