How Quickly Do Markets Learn? Private Information Dissemination in a Natural Experiment

Jackson, Robert J.; Jiang, Wei; Mitts, Joshua

doi:10.2139/ssrn.2544128

Cited by 5 publications

(5 citation statements)

References 28 publications

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“…Rogers, Skinner, and Zechman (2017) use the same event but focus only on Form 4 (insider trading information) releases. Their results are qualitatively similar to those inJackson et al (2016).…”

supporting

confidence: 85%

“…Hu et al (2017) find that E-mini S&P500 futures prices adjusted fully within 200 milliseconds after release to faster traders, with no further price drift thereafter, indicating an efficient price update. Jackson et al (2016) find that HFTs caused little price discovery within the first 100 seconds of the private window, potentially because SEC filings are difficult to interpret due to their complexity and are sometimes preceded by companies' public reports. 11…”

Section: Literature Reviewmentioning

confidence: 99%

“…These studies demonstrate causality by analyzing stock prices throughout a period during which a subgroup of fast traders had a short-term monopolistic access to information. Hu et al (2017) analyze a situation where a small group of fee-paying HFTs were able to receive the Michigan Index of Consumer Sentiment (ICS) two seconds before the general public, whereas Jackson et al (2016) analyze a situation where 40 HFTs had between several seconds and 7 minutes early access to official SEC filings containing securities disclosures. Surprisingly, these articles' results are contradictory.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Moreover, the few studies that establish a clear causal link between fast trading activity and market quality provide contradictory results. For example, Jackson, Jiang, and Mitts (2016) find that HFTs do not cause instantaneous incorporation of 1 Trade latency is generally defined as the length of the process that includes observation of an event, analysis of the information, making a decision, and executing a trade (Riordan & Storkenmaier, 2012). A microsecond is 0.000001 of a second.…”

Section: Introductionmentioning

confidence: 99%

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The effect of fast trading on price discovery and efficiency: Evidence from a betting exchange

Bizzozero

Flepp

Franck

2018

Journal of Economic Behavior & Organization

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We examine how the presence of fast traders impacts price discovery and efficiency in a realworld setting, i.e., courtsiding, the activity of live betting from a tennis stadium. This setting allows us to isolate the activity of fast-acting traders who have a short-term monopolistic access to important information with respect to other traders who trade based on delayed TV images. Using live-tennis betting data combined with detailed point-by-point match data, our results show that courtsider trading promotes quick price discovery and correctly incorporates new information into prices. We estimate that a simple trading strategy yields a positive trading return to fast traders after the occurrence of important informational events.

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supporting

confidence: 85%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The effect of fast trading on price discovery and efficiency: Evidence from a betting exchange

Bizzozero

Flepp

Franck

2018

Journal of Economic Behavior & Organization

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“…Our work relates to contemporaneous work by JM and Jackson, Jiang, and Mitts [, JJM]. Similar to our paper, JM examine whether the SEC provides a timing advantage to certain market participants .…”

Section: Introductionmentioning

confidence: 73%

Run EDGAR Run: SEC Dissemination in a High-Frequency World

Rogers

Skinner

Zechman

2017

Journal of Accounting Research

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We describe the process through which the Securities and Exchange Commission (SEC) makes filings "publicly available." For a sample of Form 4 (insider trade) filings, we show that, during the period we examine, the majority of filings are available to paying subscribers of the SEC's public dissemination system (PDS) feed before they are posted to the EDGAR website, and so provide subscribers and their clients with a private advantage. We show that this advantage translates into an economically significant trading advantage, and prices, volumes, and spreads respond to the news contained in filings beginning around 30 seconds before public posting. These findings indicate that 1 Fama [1991, p. 1607] writes that "[t]he cleanest evidence on market-efficiency comes from event studies, especially event studies on daily returns. When an information event can be dated precisely . . . event studies can give a clear picture of the speed of adjustment of prices to information." SEC DISSEMINATION IN A HIGH-FREQUENCY WORLD 461 measured in milliseconds (or even microseconds) are economically valuable (Goldstein, Kumar, and Graves [2014], Budish, Crampton, andShim [2015], Jones [2013], O'Hara [2015]). 3 The HFT traders we spoke to indicate that, conditional on obtaining the information first, the length of private advantage is not important because positions can be established within microseconds. While the casual observer may assume that the SEC dissemination process through EDGAR is effectively instantaneous, we show that, during the period we examine (March 1, 2012 to December 31, 2013), the process from upload to posting typically takes around 36 seconds (median). We further show that the news is available to certain intermediaries and investors before it is posted to the public EDGAR website: for 57% of insider purchases, filings are available to at least one PDS (public dissemination service) subscriber before they are posted to the EDGAR website. 4 This proportion is a lower bound on the relative frequency of private advantage because we have data from only one of approximately 40 PDS subscribers. 5 We show that, when the PDS feed is first, prices, volumes, and spreads move 15-30 seconds before the news is posted to the EDGAR site. We also show that, when the PDS feed is first and results in both private and public trading, a return of 28 basis points (during a window that averages 81 seconds in length) is available to the informed traders, which is economically significant for HFT firms. 6 This implies that, during the period we examine, the process through which filings are disseminated via EDGAR provides certain intermediaries and their clients with a timing advantage and that some market participants trade and profit on this advantage. In response to our study, Mary Jo White, the SEC Chair, announced plans on December 19, 2014, to enhance the system to "ensure that EDGAR filings are available to the public on the SEC [EDGAR] website before such filings are made available to PDS subscribers." 7 We focus on Form ...

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