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A.G. Schneiderman applauds deal between University of Michigan and Bloomberg ending early release of market-moving to high-frequency traders

First Published 8th October 2014

Agreement to help curb unfair practices by high-frequency traders, part of Attorney General's effort to combat 'Insider Trading 2.0'

Attorney General Eric T. Schneiderman

Attorney General Eric T. Schneiderman

"'Insider Trading 2.0' erodes confidence in the markets and unfairly disadvantages other investors."

New York - Attorney General Eric T. Schneiderman has praised the agreement between the University of Michigan and Bloomberg LP to distribute the university's consumer confidence survey through Bloomberg's news service. Bloomberg will take over distribution of the survey from Thomson Reuters, which charges investors a fee for an advance copy of the survey. Bloomberg announced that it will end that practice.

"By ending early access to critical market-moving survey data information, this deal strikes a major blow in our effort to promote fairness and avoid unfair distortions in the securities markets by cracking down on what I call 'Insider Trading 2.0,' " Attorney General Schneiderman said. "Ensuring there is one set of rules for the entire market is critical to restoring confidence in securities markets, and that's good for everyone involved."

On July 8, 2013, Attorney General Schneiderman announced an agreement with Thomson Reuters to discontinue the practice of providing high-frequency traders with access to the Michigan consumer survey results prior to the release of that information to its other subscribers. The move was prompted by an investigation by the Attorney General's office into the early release of market-moving information to selected clients, and Thomson Reuters agreed to suspend the practice pending the results of the investigation. The university's move to distribute the information through Bloomberg ends the practice permanently.

The University of Michigan's consumer survey results are among the most closely watched indicators of consumer sentiment in the United States. High-frequency traders were able to access and act on this information two seconds earlier than other Thomson Reuters subscribers. That two-second advantage was more than enough time for these traders to take unfair advantage of their early access to this information, as they can execute enormous volumes of trades in the blink of an eye.

The investigation into Thomson Reuters is part of Attorney General Schneiderman's broader effort address unfair advantages that are provided to elite and technologically sophisticated market players at the expense of others. The Attorney General has reached interim agreements with a number of prominent financial firms to stop their practice of cooperating with analyst surveys administered by certain elite, technologically sophisticated clients at the expense of others-a practice that can put other investors at an unfair disadvantage.

Those agreements followed a groundbreaking settlement with BlackRock, the world's largest asset manager, to end its practice of systematically surveying Wall Street analysts for their opinions on firms they cover.

Since federal and state regulators face many challenges in tracking and preventing these new forms of Insider Trading 2.0, the Office of the Attorney General has established a hotline for financial industry insiders to confidentially report improper or illegal conduct. Confidential witnesses have already come forward and offered substantial help with this effort. Anyone else who knows of front-running schemes, efforts to trade in illicitly gained confidential information, or firms selling early access to market-moving data is asked to call 800-771-7755.