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Nanex ~ 28-May-2013 ~ Consumer Confidence Jump Start

On May 28, 2013, about 1/4 second before the expected release of the Consumer Confidence number, trading exploded in SPY, the eMini and hundreds of other stocks. Even more interesting, activity exploded just 1 millisecond earlier in the futures (traded in Chicago) than stocks (traded in NYC). The speed of light separates information between Chicago and NYC by at least 4 or 5 milliseconds. Which means this was more likely the result of a timed trade in both futures and stocks, rather than an arbitrage reaction between the two. When the ISM Manufacturing number was released a week later, SPY traded 15 milliseconds early, but the eMini lagged by about 7 milliseconds.

We found no other instances of early trading in the 11 previous monthly releases of  the same Consumer Confidence data. A person familiar with the matter told us: The Conference Board said the information was released to the newswires in NYC at exactly 10am, not a nanosecond before.

When we looked at trades in IWM, another major index ETF, we found that there was a second surge of trading at 9:59:59.964, just 36 milliseconds before the official 10am news release. Plotting trades from all (about 8000) NMS Stocks (chart 1 below) confirms this second surge.

Update: June 20, 2013

We now believe the Consumer Confidence number was given early to several news organizations. Then as 10 am approached:

It is possible that a high frequency trading firm received the Consumer Confidence number in advance and traded simultaneously in NYC and Chicago at 09:59:59.754. This is a likely scenario, because few news organizations have the technology and experience to do timed releases in multiple locations. Furthermore, because the release at 09:59:59.754 hit both NYC and Chicago within a millisecond, it is unlikely this early release was caused by a clock synchronization problem. Because for that to happen, two different clocks running at two different locations (unless they were linked to a private master clock) would have to be off by the same amount of time: a whopping 246 milliseconds.

That leaves us with the possibility that either a news organization consciously or negligently released the information early, or someone gave it to a high frequency trading firm capable of executing simultaneously in NYC and Chicago.

Update: June 21, 2013

Dow Jones has admitted the clock they used to release this news report was not properly synchronized and caused the release to go out 1/4 second early. This would indicate the first surge was from Dow Jones. For this  to happen and fit the known facts, a master clock at Dow Jones that updated servers in NYC and Chicago would have had to be off by 246 milliseconds.

1. Trades from all NMS Stocks priced below $180 over one second of time.

Here's a video showing quoting and trading in SPY for 1/2 second - just before 10:00:00. Activity explodes at 9:59:59.755. (Or watch it on youtube)

2. IWM - Trades color coded by reporting exchange and NBBO. One Second of time.
The second surge became apparent when looking at the symbol IWM - an ETF based on the Russell 2000 index.

3. SPY - Trades color coded by reporting exchange and NBBO. One Second of time.

4. June 2013 eMini Futures trades and quote spread. One Second of time.

3b. SPY - Trades color coded by reporting exchange and NBBO. About 1/10th second of time.
Trade activity starts at 09:59:59.755

3c. SPY - Bids and asks color coded by reporting exchange and NBBO. About 1/10th second of time.
Quote activity starts at 09:59:59.754 - 1 millisecond earlier than trades.

4b. June 2013 eMini Futures trades and quote spread. About 1/10th second of time.
eMini futures trading explodes at 09:59:59.753 - just 1 millisecond before activity in stocks.

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