Perfectly Efficient or Den of Thieves?
about Sony’s or Microsoft’s? Do you read these policies? When they update their
privacy policies is it for your benefit or theirs? What do they all do with
your information? Who do they sell it to? How do you feel about that?
Stock Exchanges and Trading Venues
When you place an order to buy or sell a stock, an option, or even an eMini future,
who owns the information in that order? If you are buying 300,000 shares of a
midcap volatile stock, and are pegged, using some sort of iceberg feature
(reserve book), with discretion, or are using a BSR (broker smart router), your
order is watched. It is broken down, financially modeled, sold in the form of
enriched data feeds that arm snipers and “evolved trading firms “liquidity providers”.
When a broker upgrades or downgrades a stock (research), they sell that information
to investors and traders. They also sell it to news organizations, like
Bloomberg for example, who report on that upgrade or downgrade. This same
information is also ascertained by news aggregators, like Fly On The Wall, who
also report this information to you, for a fee, only they get it to
you perhaps more quickly than the major news organizations.
Certain private proprietary research data, like the Michigan Consumer Confidence
number, gets leaked 5 minutes before its “official release” to subscribers for
When the government releases economic statistics, like the weekly Thursday jobs data
that comes out of the BLS, they first release it to news organizations a half
hour before the actual release. Those news organizations prepare an intelligent
commentary about the data to ostensibly inform the public in an intelligent way
as a public service. Or at least that is the rationale. The reality is those
news organizations each try to scoop each other on being first out, and some of
the news organizations just take that data, and convert it into Machine
Readable Form, and sell it for big bucks to quants and HFT’s.
Selling information is big business. I mean huge, Jerry!
It always has been the primary domain and revenue purpose for news organizations;
and this has always been explicitly known. It is the primary purpose and
business model for the social networks also, and it is the primary business and
revenue for the Stock Exchanges. This is not always explicitly known, although
it is increasingly becoming unmasked.
The problem with so much of our intellectual resources being diverted to the
businesses of selling information, so that one group can edge out another
group, is that the game of gaming the information and profiting off of it
makes us all forget what we really need to be doing to innovate, to add value
to the world, to generate real economic growth, and to better serve us all.
So think on this: does our relentless pursuit of peddling private information for
scalping’s sake make our capital markets (and social ones as well) perfectly
efficient? Or does it just create dens of thieves.