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Research Shows Direct Feed Gives First Access to EDGAR Filings

A new paper finds that subscribers to a direct feed of EDGAR filings are often able to access the documents before the filings appear publicly on the SEC site. The researchers reviewed Form 4 insider trading filings from March 2012 to December 2013 and found that subscribers received advanced access to filings 57% of the time, overall receiving a 10.5 second head start. Further, the researchers found that, where subscribers received advanced access, the market responded to filings around 30 seconds before they appeared publicly on the SEC’s website. An article by the Wall Street Journal notes that the direct feed is provided by a contractor hired to run EDGAR by the SEC and that a subscription costs $1500 per month. An SEC spokeswoman quoted in the article stated, “[w]e are conducting a thorough assessment of the dissemination process, including timing increments, and will make any systems modifications that may be necessary to optimize the dissemination of information to investors and the markets.” 

Another Journal article alleges that the SEC may have known about the direct feed advantage as early as February this year. According to the article, a fund placed an order in a dark pool to sell 250,000 shares of a biotech company. Traders were confused when 200,000 shares sold within 25 seconds, a pace that they considered out of the ordinary. Approximately a minute later a filing with positive news was publicly released on the SEC’s website. According to the article, the fund alerted the SEC of the incident and the agency is declining to comment due to an ongoing investigation.