NanexIn the past few days, Wall Street has started talking about a deal between The University of Michigan and Thomson Reuters that gives the company access to it key Consumer Confidence survey data early.
It's called a "select disclosure" agreement and it also allows them to distribute it to privileged clients 2 seconds before the news breaks with service called "ultra low latency" that only works if you pay a monthly have a super high speed, close connection to a stock exchange.
This is important enough for Thomson Reuters to pay the University of Michigan $1.1 million a year for the service.
And it's important enough that, behind closed doors, there were forces at work trying to stop this deal before it started.
Emails obtained by Business Insider show that Bloomberg started fighting the deal between the University of Michigan and Reuters as early as 2006.
At that time, then-Bloomberg Executive Editor Rich Jaroslovsky sent late University of Michigan President Edward Gramlich an e-mail offering "$500,000 for a 15-minute window before public release of the survey to allow us to prepare headlines on the main index level and sub-indexes on current and future conditions as well as inflation expectations."
That, of course, was to help his own company, but he also implored the University to consider what it would be doing to other organizations — Jaroslovsky called it "checkbook journalism."
From the letter:
We would be remiss, however, if we did not ask you to carefully consider the implications of your proposed Reuters deal. As I'm sure you know, the discussions between the University and Bloomberg predated your arrival in Ann Arbor. But our interest in those discussions was to make the playing field level, not to compromise the integrity of the disclosure process by securing advantage for ourselves. Matt Winkler didn't seek naming rights for Bloomberg, or any edge for us over other news organizations in the release of the data.
By contrast, our understanding of the proposed Reuters deal smacks of what we in the news business call "checkbook journalism." By giving Reuters exclusive advance access to the data and making their service the release mechanism, you will be guaranteeing that every other news organization -- to say nothing of every investor who doesn't subscribe to Reuters -- will be disadvantaged. No wonder Reuters is willing to pay you so much more than Bloomberg: While we were offering money to help the University create a system that is fair to everyone, they are paying you to guarantee an unfair one!
Gramlich responded only that he would "consider and respond shortly."
Obviously the answer was a no.
A source with knowledge of the situation told Business Insider that Reuters is said to pay $3 million for a "select disclosure" agreement with either Markit or the Institute for Supply Management (ISM) to exclusively distribute their data in the same "select disclosure" way - except by 2 minutes versus 2 seconds.
It's worth pointing out that a human being with a decent computer can MAYBE make a trade on 2 minutes of early information, whereas with a 2 second lead, it's all about high speed, automated trading and a close tie to a stock exchange.
So there's that.
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