November 03, 2014

Johnson, Crapo Seek Information on SEC Electronic Filing Disparities

Senate Committee on Banking, Housing, and Urban Affairs
For Immediate Release
Monday, November 3, 2014
Contact: Chris Kelly (Johnson) 202-224-7391 
Mandi Critchfield (Crapo) 202-224-1576
Johnson, Crapo Seek Information on SEC Electronic Filing Disparities
WASHINGTON – Today, Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) sent a letter to U.S. Securities and Exchange Commission (SEC) Chair Mary Jo White to express concern over reports that company filings electronically submitted to the SEC are made available to private subscribers before the general public.
“Ensuring a fair marketplace is one of the SEC’s most important objectives,” said Johnson. “I urge the SEC to quickly investigate this timing disparity for company filings and take the necessary steps to eliminate it.”
“The SEC is tasked with protecting investors and maintaining fair and efficient markets,” said Crapo. “It is important that the agency, arguably more than anyone, ensures that its systems do not provide preferred access to certain parties rather than the broader market.”
A recent academic study has shown that private subscribers to an SEC direct data feed have access to information before being made publicly available on the SEC’s website. This timing discrepancy gives an advantage to certain sophisticated trading firms. In their letter, Senators Johnson and Crapo request that the SEC explain the steps being taken to eliminate this disparity and prevent this issue from happening again in the future.
The full letter can be read below, or click here to view a signed copy. 
November 3, 2014
The Honorable Mary Jo White
U.S. Securities and Exchange Commission
100 F ST NE
Washington, DC  20549
Dear Chair White:
We are writing to express concern over the discovery described in a recent academic study that company filings electronically submitted to the SEC are, in most cases, made available to private subscribers before the general public.  This disparity raises significant concerns regarding the management of the data systems that provide investors access to important, and potentially market-moving, information.
As you noted in your equity market structure speech on June 5, 2014, when looking at access to trading data “a related fairness concern is the latency difference between the direct data feeds and the consolidated feeds.”  The academic study shows that a similar dynamic exists with respect to company filings with the SEC – certain investors are given access to real-time information before it is widely available.  This unequal access is even more troubling because it results from SEC managed systems. 
Please explain the steps you are taking to fully understand and eliminate this disparity and when these steps will be completed.  In addition, please outline what you have previously done to address any similar issues, how you will review for any other discrepancies in SEC systems and how you will monitor to avoid such issues in the future.
Tim Johnson                                                                                   Mike Crapo