Following a report from earlier this month, speed traders are going to be slowed down by Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) Chairman and CEO Warren Buffett. In the report from The Wall Street Journal, the paper claimed that high-frequency trading firms were being given an unfair advantage by having “the ability to trade fractions of a second ahead of less fleet-footed investors” by purchasing direct feeds from the Berkshire Hathaway subsidiary Business Wire. The direct feeds included news releases and economic reports moments before they were distributed to other outlets.
Regulators force change?
Following the report, Business Wire became the subject of scrutiny from regulators in New York. Buffett, who is known to value his company’s reputation, has essentially put an end to this practice. In 1991, testifying before Congress about his takeover of Salomon Brothers, Buffett said he told employees of the firm “Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.”
Hayden Capital's performance update for the second quarter ended June 30, 2022. Q2 2021 hedge fund letters, conferences and more Dear Partners and Friends, The markets continued to sell-off in the second quarter, especially for internet-based businesses. This year continues to be the toughest stretch for us, since the Hayden’s inception. Inflation concerns and the Read More
Yesterday, Business Wire Chief Cathy Baron Tamraz said the company had done “nothing wrong” stating that the “article may have caused some misperceptions, and that was of deep concern to us.” And presumably, Mr. Buffett.
New York Attorney General Eric Schneiderman, in his own statement, called the company’s decision a “tremendous victory for our effort to eliminate advance trading on market-moving information.” Adding that he was impressed by Business Wire “being a responsible industry leader.”
Somewhat ironically, the latter statement was distributed by Business Wire.
The crux of the issue according to the Journal, was the fact that there was a gap at all. The report claiming that those who paid more for the faster feed received a “fleeting but lucrative edge.”
While the company responded to the report by saying that anyone could purchase the direct feed it changed it’s tune yesterday when it 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. Therefore, we have proactively made the decision to terminate these feeds.”