Bowing to complaints that high-frequency traders are profiting in the 1 or 2 seconds after it releases its market-moving crop reports, the USDA said on Tuesday that it would no longer allow news agencies to look at the reports before they are released. The news agencies transmit their reports at the same instant that USDA makes its data public.
The USDA it takes “roughly 2 seconds” for its reports to appear on its website once they are released. “There is evidence to suggest that there is significant trading activity worth millions of dollars that occurs in the 1-to-2-second period” after the reports are released, said USDA, “which cannot be based on public reading of USDA data. The inference is that private agents are paying the news agencies for faster data transmission to get a jump on the market.”
According to USDA, the solution is to eliminate, from August 1, the 90-minute “lockup” period for news agencies that dates from the early 1990s with the goal of ensuring accurate and immediate transmission of key data from the monthly Crop Production and companion WASDE reports. Working in a locked room and watched by USDA officials, reporters prepared bulletins and news stories. The USDA turned the switch to connect telephone and digital lines and dictated when the stories could be filed – often with the shout of “Go” – while reporters watched a countdown on a digital clock.
“The new procedures will level the playing field and make the issuance of the reports fair to everyone involved,” said Agriculture Secretary Sonny Perdue. “Modern technology and current trading practices have made micro-seconds a factor.”
A financial author was dubious that USDA would achieve its goal. “It advantages people who have the money to write an algorithm” to electronically glean the USDA reports and execute trades while the public has to peruse the reports page by page for the vital data, said the Chicago-based writer. Trading houses probably employ the same technology at present to move quickly on USDA reports. She said it was ironic that USDA tightened its procedures when President Trump tweeted about a jobs report an hour before the Labor Department released the material.
Before USDA allowed reporters into its lockup, reporters assembled in a special room in the massive USDA South Building, where telephone booths ringed the walls. USDA personnel placed copies of the reports, face down, in each telephone booth moments before release time while reporters stood behind a line. At the shout of “Go,” they ran a couple of steps to their phones and hurriedly yelled the top news across the wires.