Money is time and time is money – nobody knows it better than Wall Street. That is why it is pressing the court to allow it to control what is known as “hot news”. Wall Street has the unique ability for trading on news as fast as it can. Depending on the speed – it either makes gains or nothing at all.
Recently a Federal Appeals Court is considering what is meant by fast and too fast. The court listened to arguments as to whether to allow the Merrill Lynch unit of BofA, Barclay’s Plc as well as Morgan Stanley to halt a news service dealing with finance – Theflyonthewall.com Inc for speedily reporting “hot news” about the researches made by their analysts.
The banks argue that the fly has been benefiting from a “free ride” by regularly misappropriating information that included upgrades as well as downgrades related to stocks. The knowledge that some mark as ‘buy’ or others as ‘sell’ without providing more details can immediately cause a movement in stocks.
One of the partners of Weil Gotshall & Manges, R. Bruce Rich, speaking on behalf of the banks at the U.S. Second Circuit Court of Appeals said, “The business model was intended to strip away, to take the competitive edge away from our clients”. He added that in publishing research “Fly was the first, foremost, the most systematic, and the most egregious”.
In reply Fly said that it is armed with First Amendment authority to publish prior to the news becoming stale. Public sources gives it the require information. Also it picks up news by discussing traders and the like at the market places.
Fly has been supported by Google and Twitter. The latter two pressed the court to overturn the previous ruling of District Judge Denise Cote that had placed restrictions on publication. Professor Kathleen Sullivan of Stanford University and partner of Quinn Emanuel Urquhart & Sullivan said, “Times have changed. Technology has changed. There is no such thing as ‘hot news’. Hot news becomes cold in a nanosecond”.
Last March Cote had ruled that Fly would have to wait till 10 am to report its findings.
The Summit, a company based in New Jersey said that these restrictions cost the subscribers and put at stake its very survival. The injunction was kept on hold by the Second Circuit giving time to Fly to appeal.
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