July 14, 2013 at 2:27 pm
I often have found out that one needs immediate news in order to trade profitably on the news.
July 14, 2013 at 4:49 pm
High speed traders are paying companies to get the data a second or two earlier then everyone else. The algorithims and high speed networks they use give them an immediate edge over everyone else. See WSJ article on June 12, 2013 “Traders Pay for an Early Peak at Key Data” http://online.wsj.com/article/SB10001424127887324682204578515963191421602.html?mod=WSJ_hpp_LEFTTopStories
There is also a widening gulf between public and private data releases. Government is supposingly trying to release the data to everyone the same time where as private companies are looking to make a buck by releasing to paid customers first and then everyone else. We can’t compete with that. Also, we don’t have the algorithms and high speed networks and location for our severs at the exchanges to compete.
It is not my style to trade immediately on the news, as I cannot compete with the technology they use but to determine after the release if I need to adjust my trade or get out or in. Also, how can we as individual traders monitor the news all the time?
Here is another link to article on the U of Michigan Consumer Sentiment Report http://blogs.marketwatch.com/thetell/2013/07/08/no-more-early-peeks-at-michigan-consumer-data-for-now/
July 15, 2013 at 11:43 am
isn’t this like insider news?
July 16, 2013 at 6:52 pm
This was a question that a investor group that I belong to had a discussion about. If an industry, private company or non-government association collects data by surveying their members and publishing it to their members or selling it before releasing it to the public would you consider that insider trading? For example there was a WSJ article, referenced at the end, that talked about “commercial truck orders. An industry research firm emailed the monthly report to hedge funds and association members. When the data was finally released the shares in truck makers surged the next day. Entities that invested the day before made a handsome profit.
There are all types of Associations and trade groups that collect data such as the Association of Home Appliance Manufacturers, various agriculture associations, bedding barometer, etc.” As non-government entities should they not be allowed to distribute data to their members before release to the news media? As an individual investor we know the playing field is not level and we cannot respond to the news as quickly. We see the smoke but cannot find the fire. Should the government pass additional regulations that this would be considered insider trading? If you can pay for it, like hedge funds do, you have the same opportunity. Of course most individual investors probably cannot afford it.
Information in quotes referenced from the July 12, 2013, on page C1, U.S. edition of The Wall Street Journal. Headline was Peek at Truck Data, Then Stock Surged.
July 17, 2013 at 8:47 am
Lionheart, my stance is that it’s not insider trading provided that any person, theoretically, could join the member association even though, as you note, most individual investors probably can’t afford it. Now, if membership is in any way restricted, I suppose the case could be made for insider trading but, in my mind, it’s only insider information if it’s truly privileged and not available through any “above board” means – and a membership association seems above board to me.
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