A good reason to avoid short term trading

[Lsbcal]

...private sources of data available to groups with lots of money. Not illegal but maybe unethical. However, not likely to go away.

Here is a good link that discusses actual market practices: It
This link discusses the general problem, not just the incident in the news now.

Thomson Reuters distributes the consumer sentiment report as part of an arrangement with the University of Michigan, and until this week it sent the report to a select group of clients two seconds before all other clients. Reuters reportedly paid the university an additional $1 million to distribute the data to a group of elite clients who paid the media giant $6,000 a month for the 2-second advantage. Reuters would not confirm these figures.

 

[Meadbh]

I don't see why this is a surprise to anyone. Data is a commodity that adds value. It costs money to collect. If it is not taxpayer funded data, why would there be any problem in charging for timely access to it?

 

[pb4uski]

Given that it is a report that presumably needs to be opened, read and then acted on, would two seconds make a difference?

 

[timo2]

Given that it is a report that presumably needs to be opened, read and then acted on, would two seconds make a difference?

and if the recipient happened to be watching an internet cat video when the report came in, they might miss the email entirely!

I would imaging that code words in the email could be electronic read for fast response

 

[veremchuka]

I got a kick out of a story that CNBC was covering last year. It had to do with trading companies buying/leasing warehouse space or people renting space to day traders (probably both if the day trader could afford it) just over the border (river?) in NJ. The idea was because this location was so close to Wall Street or the NYSE and/or other markets they were getting a time advantage in trading and receiving info. The electrons only had to travel 0.5 miles or 1.5 miles or some such short distance vs those who were 5 or 10 or 25 miles away. Yes it was probably milliseconds or less but with computers that was an advantage. Now that's short term (distance) trading!

 

[Lsbcal]

I don't see why this is a surprise to anyone. Data is a commodity that adds value. It costs money to collect. If it is not taxpayer funded data, why would there be any problem in charging for timely access to it?

Maybe my point did not come through in linking to this article. It discusses some actual data sources that any of us can get with the right amount of $'s. That to mind mind is better then just saying that big money guys have an edge as it names some of the edge sources.

The real lesson would be for those who think they have a trading edge, perhaps with reading short term charts or the like. Having access to information ahead of your competitors puts competitors at a disadvantage. If you don't have this info, don't do the really short term trading.

P.S. Most people including me on this forum aren't short term traders so it's only of passing interest.

 

[LoneAspen]

My guess is that a two-second advantage (especially when it costs so much) isn't related to short-term trading, but high-speed automated trading. Where the information in the report is transmitted as structured data (not just a PDF with a bunch of words, charts, and graphs in it) that computers can act upon, and then immediately place buy/sell orders, probably while using high-speed networks (not just the Internet).

Definitely not the kind of technology nor automation that the Average Joe could make use of at home, even if he did have the money to pay for early access.

 

[Semiretired2008]

Unless you (a home based trader) are paying for news feeds - there is a lot of news releases you will never see or it will be so delayed (days later) that it will be useless by the time you see it and if you buy on it then you are just throwing profit at everyone else to sell on... Even if you are paying for it - it can still be delayed by 5 or even 10 minutes which is a lot more than the 2 seconds quoted in the article.

 

[ERD50]

I got a kick out of a story that CNBC was covering last year. It had to do with trading companies buying/leasing warehouse space or people renting space to day traders (probably both if the day trader could afford it) just over the border (river?) in NJ. The idea was because this location was so close to Wall Street or the NYSE and/or other markets they were getting a time advantage in trading and receiving info. The electrons only had to travel 0.5 miles or 1.5 miles or some such short distance vs those who were 5 or 10 or 25 miles away. Yes it was probably milliseconds or less but with computers that was an advantage. Now that's short term (distance) trading!

A few months back, I bumped into a sales guy I knew that sold big $$$ worth of high-tech equipment to my MegaCorp when I was there. I asked what he was up to, since MegaCorp wasn't doing so much in this area any more. He said his biggest market was selling high precision time bases to these high speed traders. I've purchased some of these for other purposes, and I can't imagine how they could utilize that kind of precision, but I guess they do. Micro-seconds and nano-seconds are child's play at that level.

-ERD50

 

[Independent]

I got a kick out of a story that CNBC was covering last year. It had to do with trading companies buying/leasing warehouse space or people renting space to day traders (probably both if the day trader could afford it) just over the border (river?) in NJ. The idea was because this location was so close to Wall Street or the NYSE and/or other markets they were getting a time advantage in trading and receiving info. The electrons only had to travel 0.5 miles or 1.5 miles or some such short distance vs those who were 5 or 10 or 25 miles away. Yes it was probably milliseconds or less but with computers that was an advantage. Now that's short term (distance) trading!

And, of course, they lease it from the exchange.

Firms pay for the server space they use: as little as $50,000 a year, but as much as $500,000 a month to co-locate at the NYSE and other exchanges, says Murray White, senior vice president of global technologies at the exchange.
...
the massive new U.S. data center, created because "co-location space has gotten pretty scarce," White says, is set to open next year in Mahwah, N.J. .... (Though the new facilities will be far from the NYSE headquarters on Wall Street, it's proximity to the exchange servers that matters to traders, and those servers will surely be at the new sites.)

 

[jollystomper]

My guess is that a two-second advantage (especially when it costs so much) isn't related to short-term trading, but high-speed automated trading. Where the information in the report is transmitted as structured data (not just a PDF with a bunch of words, charts, and graphs in it) that computers can act upon, and then immediately place buy/sell orders, probably while using high-speed networks (not just the Internet).

Definitely not the kind of technology nor automation that the Average Joe could make use of at home, even if he did have the money to pay for early access.

This is correct.This is a subset of the emerging "Big Data" and "Analytics" market. The "time" dimension of data is becoming increasingly important for companies to mine and use to their advantage, and they are willing to pay for the advantage. In this environment 2 seconds provides a huge advantage.

The Average Joe" could take advantage of this, with the proper tools. The biggest difficulty would be network speed, but depending on the volume of data and is structure it is definitely possible. Perhaps not for into on thousands of stocks, but think if you have a portfolio of 10-15 stocks on which you could get data that might impact the stock price, along with the software to analyze and place buy/sell/options orders. It could be done.

What gets interesting is if what these companies are doing could be considered "insider trading", if one acts on information that is not yet available to the general public, even if only seconds ahead.

 

[pb4uski]

....What gets interesting is if what these companies are doing could be considered "insider trading", if one acts on information that is not yet available to the general public, even if only seconds ahead.

Since the information isn't related to a specific company that is traded, but rather an economic measure, I wouldn't think it would fall under the insider trading umbrella.

 

[almost there]

"A good reason to avoid short term trading"
Lots of them.

Avoiding long term trends? Foolish.