NY AG Secures Agreement with PR Newswire to Prevent Direct Data Access for HFT

New York Attorney General Eric T. Schneiderman has struck an agreement with PR Newswire to certify annually that its direct data-feed recipients are not conducting high frequency trading with the market-moving information it distributes on behalf of public companies.

The move follows other agreements between the New York Attorney General and other services Business Wire and Marketwired, which agreed to stop providing similar market-moving data to HFTs.

Unlike the other two industry participants, which were selling directly to HFT firms, PR Newswire has never provided its direct data feed to high-frequency trading firms, even though this meant giving up incremental revenue according to Ninan Chacko, CEO of PR Newswire, a leading news distribution and reporting firm. “I think the New York Attorney General’s office saw us as a leader in this regard in fair and equitable distribution of material news,” said Chacko in an interview. PR Newswire provides an information distribution platform designed to help companies distribute press releases and other mandatory disclosures to the broad market.

“By going the extra mile to ensure its service is not abused by high-frequency traders – at any time during the trading day and in the moments after the closing bell – PR Newswire has proven itself to be an industry leader,” commented Attorney General Schneiderman in today's announcement. “High-frequency traders can use information in the milliseconds before it becomes widely available to other investors, effectively skimming from the rest of the investing public. Today’s agreement is another important step toward curbing Insider Trading 2.0, and PR Newswire deserves credit for its leadership.”

Though PR Newswire has been approached to sell the feed to HFT firms, Chacko said, “We frankly couldn’t come up with a good enough reason why we should change our policy,” he said. “We were clearly walking away from incremental revenue,” he said. “It was an independent view of what we should do and what was right,” he explained. The Attorney General’s office approached PR Newswire to formalize and strengthen its existing policy, according to Chacko. “They wanted to see if we would step up further and formalize the process we already had in place,” said Chacko, noting this would set an example for the industry. PR Newswire is owned by United Business Media, the same parent company as Wall Street & Technology.

About 20 news distribution companies, including Bloomberg, Dow Jones, Reuters, the Associated Press, Yahoo!,among others, receive the direct data feed, slightly ahead of the general feed, so that the investment public is aware of market moving information at about the same time.

hacko said he doesn’t believe that any of the direct data feed recipients are out of compliance with the policy. “We fully expect that all the primary data feed recipients today will certify that they are not engaged in high frequency trading,” he said. The company will follow up with them on a periodic basis to make sure they recertify, he added.

A second part of today’s agreement is that PR Newswire agreed to counsel its clients to delay “4:00 pm” distribution of market-moving news until the close of markets, to prevent faster recipients of the feed from trading on public exchanges. Because certain exchanges, including Nasdaq, allow trading to continue for milliseconds after the 4:00pm closing time, rhese close-of-market releases sometimes give HFT firms an edge they can exploit for milliseconds after 4:00pm, stated the AG’s release. If the cut-off is 4:00 pm, there is still a level of trading that takes place, said Chacko. By pushing the distribution to 4:01, the information is distributed one minute after the market closes. While there can be after hours trading on alternative venues, there cannot be same-day trading on the public exchanges.

“Obviously our clients can choose to decide on which times to distribute news. Our counseling is that it benefits them to avoid same day trading on the information. This way the information gets disseminated to all the intended recipients and everyone has time to process it and digest it and take whatever actions they wish,” he said.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio