Another 2 Year Old Zero Hedge Story Goes Mainstream, And A Glimpse Inside The BLS' "Frontrunning" Data Room
Those who did not read Zero Hedge in March 2011 will be shocked, shocked to learn that yet another "news" service, one owned by Deutsche Börse, was merely disguising as an HFT-facilitating, instanews disseminating, speed roadblock removing provider, who just happened to charge $375,000 per year for its frontrunning services. The firm in question, as the WSJ reports today, was "founded by an investment firm and now owned by the Deutsche Börse stock exchange, Need To Know News has operated with an overriding mission: sending data directly from the government through high-speed lines to financial firms that are able to trade on it instantly. Some have paid $375,000 a year for the service."
It is this same company that due to its embargo-bypassing capabilities, has been the target of an ongoing SEC probe since 2011, and which for various reasons has now been banned from participating at BLS "lockup" events (even though virtually every other "premium" news-service does what NTKN did).
Of course, those who did read Zero Hedge in March 2011 will already know all about Deutsche Boerse's "news dissemination" strategy which was covered here first with "Alpha Flash: For All Your Nanosecond, Collocated, Algorithmic Frontrunning Needs" in which we tongue-in-cheekly asked "Ever feel like your nanosecond algorithmic frontrunning skills are becoming obsolete? Unable to scalp even a few extra pennies from illiterate orphans, widows and kittens armed with REDIPlus 9.0? Despair not, for Deutsche Boerse [and Need to Know News LLC] has Alpha Flash just for you."
More from Zero Hedge from over two years ago:
Deutsche Börse, Market News International (MNI) and Need to Know News (NTKN) have developed a low latency data feed that delivers market moving economic indicators and releases to our clients faster than any other service currently available.
AlphaFlash is designed for the most demanding algo traders at hedge funds, trading firms and financial institutions. MNI and Need to Know News are both fully accredited news agencies with direct access to government lock-up rooms and embargoed news.
- Consistently faster and more economical than competitor products
- Data is sent directly by our journalists from government lock-ups
- Designed for easy direct integration into trading algorithms
- Global co-location and other connectivity options
- AlphaFlash uses the high speed global network of Deutsche Börse and was designed by technology experts from the world of low latency trading.
But wait, there's more:
Need To Know News LLC has developed and tested new technology that allows us to deliver economic releases and data to clients consistently faster than any service currently available. Since August 2007 we have officially made our service available to sophisticated hedge funds and financial institutions.
In the world of algorithmic trading, speed and accuracy are top priorities. NTKN is a Washington, D.C. based fully accredited news agency like Dow Jones, Reuters and Bloomberg. AlphaFlash is the way to get key U.S. domestic and international economic releases and data directly into your trading algorithm.
Unlike our competitors, NTKN is not a traditional news service burdened by an aging, inefficient infrastructure with thousands of general financial news subscribers. AlphaFlash's infrastructure and architecture were designed by technologists from the world of electronic trading specifically for a select group of sophisticated algorithmic clients.
How it Works
Our reporters, using our custom-built applications, send the data from press rooms the very first instant it is allowed. The data flows through our dedicated network lines into our core systems and travels directly to you. We encourage customers to utilize our co location facilities and cross-connect to NTKN for the fastest possible data delivery.
And if you order now, for 5 low payments of $49,995 you will also get a one year trial access to Inside Information Inc, the one and only expert network that everyone wants to join and that does not tape or leak its client-"consultant" conversations, a decade subscription to Larry Meyer's Newsletter: "How 2+2 is 5 in Keynes' special case", as well as lifetime access to Paul Krugman's ad hominem blog attacks from behind the NYT paywall.
Just a tad ahead of the curve.
And now that the SEC, and WSJ have caught up, here is what everyone else knows:
It is legitimate, though, under the Washington press corps' loose rules on what counts as a media outlet. It also is an example of how in an era of Internet speed and algorithmic trading, finance professionals have figured out how to take advantage of the federal system for releasing reports in ways ordinary investors can't.
Concerns about the fairness of this, along with suspicions that market-moving data sometimes leak out a fraction of a second early, are leading some in the government to rethink whether the current system still works. The suspicions of leaks also lie behind a long-running, still-unresolved federal investigation that has entailed scrutiny of a wide range of news organizations.
Need To Know News has been close to the center of this probe. A look at the service sheds light on growing concerns about data releases.
In 2011, the Securities and Exchange Commission subpoenaed computer hard drives used by Need To Know News's reporters, documents reviewed by The Wall Street Journal show.
The same year, the Federal Bureau of Investigation installed a hidden camera at a Labor Department room where reporters gather to see economic reports a half-hour in advance of their release, under a news-embargo system that is known as a "lockup."
Last year, the Labor Department took the unusual step of essentially banning Need To Know News from its lockups.
Need To Know News retained access at other federal agencies as well as several foreign governments and private groups that release market-sensitive reports.
While declining to comment on the FBI or SEC moves, Deutsche Börse said that it "always operates its financial news and other market data businesses strictly in compliance with applicable laws, regulation and other codes of conduct." In addition, "we strive to maintain good and appropriate relationships with governmental and regulatory bodies," it said in a statement. "Our standard practice is to cooperate fully with regulatory process reviews and investigations conducted by these government entities."
Guess not, but when the trade off is $375,000 per subscription, the definition of "applicable laws" becomes a little blurry. The remainder of the article focuses on the scam that is early data release that byspasses traditional bottlenecks that at least try to make not a complete travesty of "fair and honest" news dissemination.
It does have a pretty image though showing just what goes on at the BLS frontrunning zoo:
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