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N.Y. AG notes growing threat of early access trading abuses

By Bryan Cohen | Sep 25, 2013

NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman remarked on the threat to financial markets Tuesday posed by high-frequency trading, the illicit sale of early access to market-moving information and early access to analyst reports.

Schneiderman made the statement Tuesday during the annual Bloomberg Markets 50 Summit. He said the new form of Insider Trading 2.0 undermined confidence in the market by giving a small minority of traders huge profits at the expense of the rest of the market.

"When blinding speed is coupled with early access to data, it gives small groups of traders the power to manipulate market movements in their own favor before anyone else knows what's happening," Schneiderman said. "They suck the value out of market-moving information before it even goes public. That's 'Insider Trading 2.0,' and it should be a huge concern to anyone who cares about the markets and the free flow of capital on which our economy depends."

Earlier this year, Schneiderman's office secured an interim agreement with Thomson Reuters to discontinue the practice of providing high-frequency traders with a two-second sneak peek at some market-moving consumer results. Thomson Reuters previously sold early access to the University of Michigan Survey of Consumers, a closely watched indicator of consumer sentiment in the United States.

Schneiderman's office continues to look into the scope and impact of this and other similar practices.

Schneiderman said his office set up a hotline for financial industry insiders to confidentially report illegal or improper conduct. Individuals can use the hotline to inform Schneiderman's office of selling early access to market-moving data, trading in illicitly gained confidential information and front-running.

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