March 6, 2021

Common Sense: Fair Play Measured in Slivers of a Second

Two seconds may not seem like much, but for high-speed traders with supercomputers, it’s plenty.

The difference was arresting. On Friday, just 500 shares of a leading Standard Poor’s 500 exchange-traded fund traded during the first 10 milliseconds of the two-second window before the release of the University of Michigan data to Thomson Reuters’ regular clients, according to the market research firm Nanex. A year ago, on July 13, 2012, 200,000 shares traded during that 10-millisecond period, Nanex said.

Friday’s trading was all but “nonexistent,” said Eric Hunsader, founder of Nanex. “It was all about gaming the news, not the news itself.”

As an attempt to level the playing field for all investors, Mr. Schneiderman’s action clearly had an immediate effect. And he has said the settlement with Thomson Reuters is only a first step. While Thomson Reuters agreed to suspend the two-second advantage while his investigation continues, its regular clients get a five-minute jump on the general public, which gets the data at 10 a.m. Thomson Reuters pays the University of Michigan close to $1 million a year for the right to distribute the data.

The five-minute edge may well be the next target, since either everyone gets the information at the same time, or they don’t, whether the gap is seconds, minutes or hours. And Mr. Schneiderman has made it clear that Thomson Reuters isn’t the only target of a wide-ranging investigation.

The University of Michigan index falls into a broad category of private data that can move markets, or stocks in individual companies. About a dozen indexes compiled by private sources regularly affect markets; some of those are also released early. Other data is more industry-specific, but can also move sectors and individual stocks. Media companies have been trying to generate revenue and increase profits by charging fees for early access to all kinds of information.

All of this raises the question: Should everyone have access to market moving information at the same time? It turns out the answer is hardly self-evident.

For some market experts, the attorney general’s move is long overdue. Mr. Schneiderman is “a mile ahead of the Securities and Exchange Commission, which has to be dragged slowly and grudgingly toward raising the standard of behavior,” said John Coffee, a professor and expert on securities law at Columbia Law School.

The Securities and Exchange Commission is also collecting data on Thomson Reuters’ practices, although officials at the agency have said their jurisdiction is limited. An S.E.C. spokesman declined to comment.

Mr. Schneiderman’s investigation is the latest in a long series of efforts to reduce both the reality and the perception that the nation’s securities markets are rigged to favor those who already have money, power and special access. A vast network of laws and regulations is aimed at creating a more level playing field for investors, like criminal laws that ban securities fraud and the S.E.C.’s Regulation Fair Disclosure, which requires companies to widely disseminate market-moving information about themselves. Consider also the simultaneous public release of government information like employment data and the Federal Reserve minutes.

The goal is not just fairness, but to make capital markets more robust by encouraging the public — not just professional speculators — to invest.

“The reason America’s markets are the best and strongest markets in the world is that individuals always believed they could get a fair trade,” Mr. Schneiderman told me this week. “If you did your research well, you weren’t at a disadvantage because of information you couldn’t possibly access. It wasn’t a rigged casino.”

This article has been revised to reflect the following correction:

Correction: July 12, 2013

An earlier version of this column erroneously included an index from the Institute for Supply Management among those that are released early to some users. The I.S.M.’s manufacturing data is released at 10 a.m. eastern time to all users, including clients of Thomson Reuters.

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Bits: Facebook Plays Down Campaign Against Google

3:17 p.m. | Updated Added comment from Burson-Marsteller and public relations experts, and more details on Social Circle.

The war between Silicon Valley’s best-known rivals has just escalated a notch.

Facebook on Thursday sought to minimize negative publicity over revelations that it had hired a high-profile public relations firm to plant negative stories in major media outlets about its archrival,  Google.

The Daily Beast reported that Facebook had hired Burson-Marsteller, which worked for Hillary Rodham Clinton’s presidential bid in 2008, to persuade reporters and privacy advocates to write stories critical of a Google feature, Social Circle. But the effort backfired after a prominent privacy advocate and frequent Google critic, Christopher Soghoian, said the feature did not violate privacy and published his e-mail exchange with Burson.

In the e-mails, a Burson representative writes that Social Circle is “designed to scrape private data and build deeply personal dossiers on millions of users — in a direct and flagrant violation” of Google’s agreement with the Federal Trade Commission. At one point, the Burson representative refused to disclose its client.

In an interview, Mr. Soghoian described Social Circle as innocuous from a privacy perspective and criticized Facebook, which has been dogged by a long series of privacy problems.

“For Facebook to raise the privacy issue, they have to hide behind P.R. people,” Mr. Soghoian said. “Google is a major offender on privacy. But this particular issue is not a big deal.”

Social Circle shows how Google tries to personalize search results by adding items your friends have liked on various social sites.

Facebook denied that the company had engaged in a “smear campaign,” and said that it was simply trying to bring what it believed was a privacy problem to the attention of reporters and privacy advocates. In a statement, it said:

“No ’smear’ campaign was authorized or intended. Instead, we wanted third parties to verify that people did not approve of the collection and use of information from their accounts on Facebook and other services for inclusion in Google Social Circles — just as Facebook did not approve of use or collection for this purpose. We engaged Burson-Marsteller to focus attention on this issue, using publicly available information that could be independently verified by any media organization or analyst. The issues are serious and we should have presented them in a serious and transparent way.”

Facebook said people should decide for themselves whether Google’s service violates privacy.

The Burson campaign, which included two high-profile former journalists, Jim Goldman of CNBC and John Mercurio, a former political reporter, also pitched USA Today and other privacy and security experts.

Google declined to comment.

Whatever its impact on the Google-Facebook rivalry, the spat has not helped the Burson-Facebook relationship. In a statement, Burson said it shouldn’t have agreed to the Facebook assignment.

“The client requested that its name be withheld on the grounds that it was merely asking to bring publicly available information to light,” the public relations agency said. “Whatever the rationale, this was not at all standard operating procedure and is against our policies, and the assignment on those terms should have been declined. When talking to the media, we need to adhere to strict standards of transparency about clients, and this incident underscores the absolute importance of that principle.”

Burson is no longer working with Facebook. The split was confirmed by Paul Cordasco, a representative of Burson. Mr. Cordasco declined to say whether any Burson employee had been reprimanded.

Some public relations professionals said both Facebook and Burson should have been upfront and disclosed who was behind the campaign.

“It’s simple,” said Rosanna Fiske, chief executive of the Public Relations Society of America. “They took the road of misleading and not disclosing who they were representing. In the essence of the public relations code of ethics 101, that’s a no-no.”

Google users can choose to connect their social networking accounts from services like Facebook, Flickr, LinkedIn and Quora to their Google profile at Then, if they are logged into their Google accounts, search results on a given topic will include items posted by one of their friends on the topic. For example, a search result for “best restaurant San Francisco” might show that a friend has recommended a restaurant on Twitter.

People can also see recommendations of links posted by friends of friends, which Google calls secondary connections. Google users can see who their direct and secondary connections are by visiting and looking at the section on Social Circle and Content.

Mr. Soghoian minimized the privacy implications of the service noting that references to links that friends from other social networking sites have posted only show up on Google if they are publicly available on the Internet. If someone has a locked Twitter account or has strict Facebook privacy settings, for instance, they won’t show up.

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