Anatomy of Information

Market information mostly spreads through well-known, closely watched conduits. Corporate earning reports, economic reports, and corporate regulatory filings with the Securities and Exchange Commission are primary conduits. Financial media and bank analysts often amplify these reports just before they are scheduled for release, and after they have been reported. Of course, timing is everything. Even the analyst reports that are so widely remarked upon by financial media, and play such critical roles in the decisions of individual investors, are terribly dated. The reports are typically released on a tiered schedule. The best clients get the reports first. They get to trade first. Then the reports are sent to other clients. The media get the report the next day, or 15 minutes after everyone else, which in these fast, electronic markets means the next day. The media often bring in individual investors who buy and create opportunities for the bank’s best customers to sell.

Information seeps into and through the market in various ways. Wall Street’s information is organized in databases and news engines by stock ticker symbols and subject codes. A few keystrokes on a Bloomberg terminal instantly reveal everything known about a stock. Most people do not have access to Bloomberg terminals, which can cost $2,500 or more a month. These terminals can be standalone or part of the trading terminals customized by banks and hedge funds. They include 24/7 financial news ...

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