SEC Investigating Early Release of Reuters, ISM Data
The SEC is investigating the relationship between the news organization Thomson Reuters and the Institute for Supply Management, CNBC has learned.
The two entities join forces to publish market-moving manufacturing data that is generated by ISM and published to high-speed data clients by Thomson Reuters.
CNBC reported earlier this month that ISM's manufacturing data was inadvertently sent out early by Thomson Reuters on June 3rd to its high-speed clients, many of whom immediately traded on the information. There was a sharp market reaction to that burst of trading, which prompted downward moves in the SPY ETF, which serves as an investing tool for traders to bet on the overall direction of the market. That downward surge came 15 milliseconds ahead of the official release time for the data. In an era of super-fast computer trading, 15 milliseconds is more than enough time to profit from early knowledge of market moving information.
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ISM CEO Thomas Derry told CNBC Thursday that the SEC reacted to that report by asking Thomson Reuters for a copy of its contract with ISM. The two organizations released a redacted form of the contract to the SEC, Derry said. "The SEC did speak specifically to Thomson Reuters about our relationship," Derry said. "We have not been contacted by any government entity."
Derry said that in the wake of the incident ISM has spoken to Thomson Reuters about the mechanics of the release of data, and he's satisfied that the situation will not be repeated. "We have to be smart enough with our partners to manage the process appropriately so we're not giving anyone a running start," he said. "I'm very confident that Thomson Reuters has put itself in a place for no more repeat of the premature release," he said.
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A spokesperson for Thomson Reuters did not immediately respond to a request for comment. A spokesman for the SEC declined to comment.
The June 3 incident was spotted by an analyst at Nanex LLC, who alerted CNBC to it. Nanex data show as many as 30,000 shares of SPY traded in 1 millisecond during the course of the 15 millisecond gap between the inadvertent release and the official public dissemination of the information that day. In addition, Nanex said it saw downward moves in 369 stocks during the 15 milliseconds. All told, Nanex calculated that $28 million worth of shares were exchanged in a short time before the official release of the ISM data.
UPDATE: Thomson Reuters released the following statement: "Following the inadvertent early release of ISM data on June 3, Thomson Reuters received a telephone inquiry from the SEC regarding the release. Thomson Reuters explained that the early release was due to a clock synchronization issue. As part of this conversation, the SEC requested a copy of the contract with ISM. After obtaining ISM's consent, Thomson Reuters voluntarily provided a copy of the contract with the pricing details omitted."
—By CNBC's Eamon Javers, with reporting by Katy Byron. Follow him on Twitter: