Business Wire, the distributor of press releases owned by Warren Buffett’s Berkshire Hathaway Inc. (A:US), will stop letting high-speed trading firms purchase direct access to its service.
After consulting with Buffett, a billionaire known for holding onto investments for decades, Business Wire decided to avoid the reputational hit from an association with high-frequency traders, who often enter and exit positions in less than a second.
“There was nothing wrong in Business Wire serving these handful of HFTs directly,” Chief Executive Officer Cathy Baron Tamraz said yesterday in a statement. A Wall Street Journal article this month highlighted the access Business Wire granted some traders. “The article may have caused some misperceptions, and that was of deep concern to us,” she said. “Our most important assets are our reputation and the trust we have earned from our clients and other market participants for more than a half century.”
Man, Machine and the Stock Market
By directly subscribing to Business Wire’s stream of potentially market-moving corporate statements, traders could shave thousandths of a second off the amount of time it took to receive and process the information in corporate press releases, including earnings and merger announcements. Without that option, the fastest traders will have to rely on middlemen such as Bloomberg News parent Bloomberg LP, Thomson Reuters Corp. (TRI) and News Corp.’s Dow Jones to get the quickest access to company announcements.
The move was welcomed by New York Attorney General Eric Schneiderman. It’s “a tremendous victory for our effort to eliminate advance trading on market-moving information and a demonstration of Business Wire’s commitment to being a responsible industry leader,” he said in a statement.
Berkshire of Omaha, Nebraska, bought Business Wire in 2006. Amazon.com Inc., United Parcel Service Inc. and Goldman Sachs Group Inc. are among corporations that make announcements through Business Wire. UBM Plc (UBM)’s PR Newswire is the other major U.S. press-release service. Bloomberg News distributes statements from both to its customers.
Buffett has previously criticized high-speed traders. Their activity “is not contributing anything to capitalism,” he told CNBC during an interview last year.
Tim Quast, the Denver-based president of ModernNetworks IR, which advises public companies on trading topics, praised Business Wire’s decision.
“If there is the appearance of evil from distributors of news and information, then they ought to take steps to remove that appearance,” he said.
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