Study finds investors subscribed to contractor feed get documents before SEC website
High-frequency traders and other speedy investors can receive filings to the SEC on average 10 seconds ahead of others, giving them a crucial edge when trading off important corporate news, according to a study by academics from two US universities.
Investors who subscribe to direct-access feeds from an SEC contractor can take advantage of a delay between the time they receive the documents and the time those documents reach the SEC’s public website, the study of more than 18,000 filings shows. The lag time can range anywhere from no difference at all to more than a minute, giving fast investors plenty of time for multiple trades before the news becomes public.
‘We further show that prices, volumes and spreads respond to the filing news beginning around 30 seconds before public posting, consistent with some market participants taking advantage of the posting delay,’ state study authors Jonathan Rogers of the University of Colorado and Doug Skinner and Sarah Zechman from the University of Chicago Booth School of Business in a press release. ‘These results raise questions about whether the SEC dissemination process is really a level playing field for all investors.’
The report also shows that it takes an average of 40 seconds between the time a filing is accepted and when it appears on the SEC website, but that markets begin reacting to the news through price movements just 30 seconds, on average, after the filing is accepted. That means some traders can take advantage of the news 10 seconds before others.
The SEC says in emails to journalists that it is studying the paper and is ‘taking the issues raised by it seriously’, according to the Wall Street Journal, which first reported on the results of the study. ‘We are conducting a thorough assessment of the dissemination process, including timing increments, and will make any systems modifications that may be necessary to optimize the dissemination of information to investors and the markets,’ the regulator adds.
