Thompson Reuters suspends early release of data as US probes data providers

Investigators are probing a number of the top financial data providers over profits made by savvy investors with early access to market-moving information.

Bowing to pressure from New York state's attorney-general, Eric Schneiderman, Thomson Reuters yesterday suspended its the practice of allowing clients who paid extra, a two-second early access to market moving consumer sentiment data.

The office of the attorney general is investigating the $25-billion market data industry, and the profits made by some of its biggest clients from trading in the minutes or milliseconds before other investors saw market-sensitive data, according to the Financial Times, citing a source.

The investigation was prompted by questions over Thomson Reuters' partnership with the University of Michigan. Since 2008, a select group of high-frequency trading houses, banks and other clients have had the opportunity to pay a fee, reportedly as much as $6,000 a month, to receive the university's twice-monthly consumer confidence survey two seconds ahead of other clients.

A number of other economic reports are also available two minutes early to select investors, including Markit's Purchasing Managers' Indices, which Thomson Reuters distributes to all its subscribers.

The Chicago Business Barometer from Deutsche Börse and the Institute for Supply Management had also been made available three minutes ahead of public release.

The newspaper cited a person familiar with the investigation as saying that Schneiderman's team was looking at whether early data releases violated the Martin Act, a New York state law that allowed prosecutors to pursue fraud charges without having to prove intent.

The early information is packaged by Thomson Reuters for clients in a format that allows their high-speed, computer-driven trading systems to exploit the data, making rapid-fire trades in stocks and futures before others could access it.

Schneiderman's investigation got underway in April following a former Thomson Reuters employee filing a whistle-blower complaint about the practice, The New York Times reported citing a person briefed on the inquiry.

The attorney general's investor protection bureau was specifically examining the early disclosure and, more broadly, whether preferential disclosure of data was a fair and appropriate business practice.

Defending the practice, a spokesman for Thomson Reuters said the company was fully cooperating with the attorney general's review.