400ms of insider information

High frequency (insider) trading.

Nanex Research has found what looks like insider trading in the natural gas market prior to the release of the US Energy Information Administration's natural gas report. The quirk is that that insider trading happened just 400 milliseconds before the report was released:

On January 31, 2013, approximately 400 milliseconds before the official release of the EIA Natural Gas Report, trading activity exploded in Natural Gas Futures and ETFs such as UGZ, UNG and BOIL. Now that the Feds have stated (as claimed by a recent WSJ article) that they don't think there is merit in prosecuting people who get news information earlier than others by milliseconds, is it any wonder?

It is worth pointing out that the EIA Natural Gas Report comes out weekly (every Thursday at 10:30) and the market reacts within a few milliseconds. This is because the report centers on one number which makes it easy for machines to process and take action.

As Nanex points out, a recent SEC investigation into whether some news organisations gave investors access to economic data "a fraction of a second before the official release time" resulted in no charges being brought. At the time, it was speculated that there were two reasons for that: the first being that such a prosecution would stretch the definition of insider trading, and the second being that it was difficult to conceive of such a head start leading to any measurable advantage.

Insider trading is typically defined as acting on information which has not yet been made public (the legal definitions are far more complex than that, but that's largely owing to the byzantine nature of financial regulation). The problem with prosecuting news organisations for that is that typically, information hitting the newswires is the definition of it being made public. This has caused problems before: last year, Netflix's CEO faced trouble from the regulators for announcing on his Facebook page that the company had had over a billion cumulative viewing hours in one month. Facebook is not, apparently, "public" enough for the SEC.

If one of the newswires publishes information a fraction of a second before the others, that might constitute a broken embargo, or an undesirable leak; but it probably doesn't constitute insider trading, because the very act of publishing made formerly private information public (even the etymology's the same! "Publish" literally means "to make public").

But the second argument was that, in the seconds leading up to a potentially market-moving data release, trading slowed down and waited for the news. After all, there's no one — not even an algorithm — which isn't going to think a trade a fraction of a second before a data release offered at a markedly different price isn't a tiny bit suspicious.

That argument might not hold as much water if Nanex's data is accurate, though. It shows a definite collapse in the price of a natural gas exchange-traded fund (ETF) over the course of a hundred milliseconds. A fall of one per cent — even one which is then followed by an even greater fall once the actual data is released — is not to be sniffed at.

It's not clear who the counterparties in these trades were — who, that is, was convinced to make trades milliseconds before a major data release — but it's pretty likely that they were also algobots. Insofar as this represents a transfer of income from one set of computer-owners to another set, it's not the most concerning news. But it does raise further questions about how the market for information is shaped in the near future, and whether the simple dichotomy between public and not public information can hold up in that new world.

"UNG showing trades color coded by exchange between 10:29:59 and 10:30:04." Chart: Nanex Research

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

All photos: India Bourke
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“They cut, we bleed”: activists Sisters Uncut protest closures of women's services

 “Our blood should not pay for our rape.”

Over 500 domestic violence survivors and support workers processed through central London this weekend. The protest, staged by the feminist direct action group Sisters Uncut, mourned the women’s services that are losing out as a result of the government's austerity drive.

Since November 2014 the group has occupied streets, burned copies of the Daily Mail, and hijacked the Suffragette film premiere. But on Saturday the mood was somber. In Soho Square the group staged a symbolic funeral service. Attendees stood in a protective circle, fists raised, while members took turns to read out the names of the scores of women who’ve been killed by men in the past year:  “Anne Dunkley, 67; Nadia Khan, 24; Lisa Anthony, 47…”. The youngest was just 14 years old.

The service culminated in a promise “to never forget” the dead, and also to protect the living: “We must love and support one another; we have nothing to lose but our chains".

As the protestors passed St Martins in the Fields Church, dressed in black veils and funeral attire, the crowd of passers-by broke into spontaneous applause. “It gave me goosebumps”, Caroline, an activist and former victim of abuse told me. “You expect people on the march to be supportive but not the people on the street. I’ve been on other marches and people normally complain about you being selfish and blocking up the streets but this response makes you feel like people do  care.”

The show of public support is especially welcome in the aftermath of the Chancellor’s Autumn Statement. Cuts to local authority budgets have already led to the closure of over 30 domestic violence services since 2010, including Eaves, a charity that provided services for single, low-income and vulnerable women.

Further erosions to local council budgets will only put more services and lives at risk, activists say. Also of concern is Osborne’s decision to devolve responsibility for raising a social care tax (of up to 2 per cent on council tax) to local authorities. This tips hostility to tax increases away from central government to local authorities, and could place greater pressure on women’s services to compete for funding.

The Chancellor offered a supposed silver lining to the cuts with the promise that VAT money raised from the EU’s compulsory tax on sanitary products will be ringfenced for women’s charities, such as the Eve Appeal and Women’s Aid.

The implication, however, that only women are to pay for helping the victims of domestic violence was met with derision from Sisters Uncut. As the marchers approached their final destination in Trafalgar Square, red dye turned the square’s famous fountains the colour of blood. “This blood won’t wash the blood from Osborne’s hands,” read one tampon-draped banner; “Our blood should not pay for our rape”, read another.

For those on the march, the cuts are an affront on many levels. All those I spoke to worked in some form of public service; everything from housing to foster care. But some have had to move out of the women’s services sector for the lack of funding.

Louisa used to work for a domestic violence service in London until it was forced to close last month. “I’m here because I’ve witnessed first hand what the cuts are doing to women and how much the organisations are having to squeeze what they can provide.”

All public services have legitimate claims to support - from the 14-strong police team that escorted the marchers, to the sweepers who were left to dredge the protesters’ roses out of the fountains and brush away the tampons that had fallen from their banners.

The danger, however, according to Caroline, is that the needs of domestic violence victims are all too easy to sideline: “This is by its nature something that goes on behind closed doors,” she says. As funding tightens, these voices musn’t be squeezed out.

Sisters Uncut is an intersectional group open to all who identify as women. The national domestic violence helpline offers help and support on 0808 2000 247. Members of the LGBT communities can also access tailored support from Broken Rainbow on 0800 9995428.

India Bourke is the New Statesman's editorial assistant.