How Thomson Reuters gives some traders an advantage

Eamon Javers of CNBC reports how Thomson Reuters is allowing a consumer confidence number that routinely moves markets upon release to be accessed by an elite group of traders, for a fee, a full two seconds before its official release.

Javers writes, “For exclusive access to the data, Thomson Reuters pays the University of Michigan $1 million per year, according to the contract, in addition to a “contingent fee” based on the revenue generated by Thomson Reuters. The contract reviewed by CNBC was signed in September of 2009. It expired a year later. Thomson Reuters and the University Michigan confirmed that the relationship still exists.

“In a statement, Thomson Reuters said, ‘Through an agreement with University of Michigan, Thomson Reuters is the exclusive distributor of the Thomson Reuters/University of Michigan Surveys of Consumers to its clients through various subscription services as well as to the general public via a press release. Details of the tiered release of this data are provided openly to Thomson Reuters customers and the wider public and anyone wishing to trade on this data can pay for the service that best meets their data needs.’

“Many market participants are not aware that some traders get a head start on market-moving data with plenty of time to execute trades before the general public receives the same information. And the existence of an elite group that receives early information is likely to attract criticism that it doesn’t square with the principle that market-moving information should be released to all market participants equally.

“‘I worry that there’s both a fairness and a disclosure issue,’ said former Securities and Exchange Commission Chairman Harvey Pitt. ‘If I’m paying a lot of money, I should know whether I have the best deal possible. If there was no disclosure of the tiered structure, that would be a serious problem.'”

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