Misaligned incentives seem to be a common trait in selling financial products. After issuer-paid credit ratings and stock exchanges which cater to high frequency traders, even data releases are not immune to such practices. Thomson Reuters is now under investigation for releasing a well-known customer confidence survey two seconds earlier to select clients for a $6K/month fee. In terms of information fairness, they issue is clear - high frequency traders have a huge advantage other short term traders without such information. However, what is the alternative?
Like free email, the market does not support the conflict-free model for these industries. Few customers are willing to pay for basic email or credit ratings. The later is especially difficult to conceal at the high level because of the ease of free-riding (e.g. a AAA for a company only takes three characters to send and the issuer wants it to be as well known as possible). How else can such companies compete when everybody wants it but nobody is willing to pay by themselves? This is not a defense of such practices, but rather an investigation as to the why.
While we may want this:
(Source: http://thinkbeta.com/blog/2012/01/25/thursday-president-obama-fairness/)
It may be very hard to achieve "absolute" fairness without paying for it in some other way.
This brings up a larger question: are the most profitable operations, in finance and beyond, riddled with conflict of interest? Does "fair" mean unprofitable? As Hank Greenberg once said, "All I want in life is an unfair advantage."
(icon source: http://www.davenussbaum.com/forget-about-fairness/)
we also need to investigate anyone using a bloomberg. Not everyone can afford a 2000 dollar a month fee, so therefore it gives them an unfair advantage. Also bloomberg gives you news way too fast, it takes soooooo long for yahoo finance news to get updated.
Also its not fair that some people get a leg up that have access to nasdaq level 2 quotes. this creates an uneven playing field for people who only have access to level 1 on yahoo finance. We need to investigate anyone who has level 2 quotes.
also while we're at it. lets investigate, anyone using any programming of any kind (including excel) to make trades. Some people dont know how to program or use excel. Why should the people that cant program spend ten years learning to code when the govt. can just make it illegal to use a program to trade. That would create an even playing field.
Also anyone that uses anything beyond algebra in making trading/investing decisions should also be banned from trading. Otherwise people that are good at like calculus, are gonna take all the money away from everyone! This would definitely create a level playing field.
so if we do these things it would make it more fair and level playing field, for ordinary investors so that they are not at a disadvantage. otherwise all those mathematicians are going to steal from everyones pension funds.
sarcasm
in all seriousness, I dont see the issue here with what reuters did. If these firms can afford an advantage then good for them. eventually the price of that data should converge with whatever advantage its actually worth. good for the hft firms and good for reuters for making the market more efficient.
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