THE NEW YORK STOCK EXCHANGE wrote to its listed companies last week to remind them of their disclosure obligations, including its policy around issuing news releases about material information.
The exchange said that it “feels strongly that its longstanding policy of requiring a press release for the dissemination of material corporate information is in the best interests of listed companies, as well as their current and future investors.”
That statement sounds fine on the surface but it is utterly ridiculous when you look at what the exchange considers “adequate coverage” in terms of who its listed companies should send their press releases to. To quote from the letters:
To ensure adequate coverage, Section 202.06(C) of the Listed Company Manual states that press releases requiring immediate publicity should be given to Dow Jones & Company, Inc., Reuters America and Bloomberg Business News. A listed company is also encouraged to promptly distribute its releases to the Associated Press and United Press International as well as to newspapers in New York City and in cities where the company is headquartered or has plants or other major facilities. (emphasis added)
The letter and policy then go on to provide fax numbers and email addresses for some of the above organizations.
Are you chuckling to yourself yet?
Anyway, notice how their recommended distribution gives precedence to premium proprietary paid networks that typically only professional traders, and hedge funds, can afford to subscribe to. How much does Bloomberg cost per year? $20,000? $25,000?
Next in line are the mainstream newswire services. AP is going great guns, but UPI is a shell of its former self. By my count, it issued all of 13 business stories this past Friday.
And newspapers? Haven’t you heard the news?
It’s not hard to see why this recommended distribution circuit is unfair to retail investors. Or why it’s highly inefficient in terms of getting information to a broad audience as quickly as possible.
In every case, NYSE Regulation is relying on the news organization to input the companies’ press releases into their systems. That takes time. So whoever subscribes to the fastest service theoretically gets to trade on the information first and profit ahead of other traders.
Notice, too, how the policy makes no mention of the Internet — the most open, efficient, lowest-cost information medium in history. Obviously, Section 202.06(C) of the Listed Company Manual was written before the advent of the modern Web and technologies such as Really Simple Syndication (RSS) and Atom feeds, or instant messaging and Short Message Service (SMS).
All of these technologies allow companies — at next to no cost — to distribute their press releases to thousands, if not millions, of people quicker and more efficiently than any of the exchange’s preferred distribution points.
Companies can send their information directly to the traders. And not just to their desktops, but to their Blackberries or any other Internet-enabled device.
Again, at next to no cost to either the company or the investor.
At the same time, popular websites such as Yahoo! Finance, which boasts 13 million users, can also receive companies’ RSS or Atom feeds directly and post the information for their users. Other finance sites can do the same.
Right now, Yahoo! Finance is carrying the RSS feed of Sun Microsystems CEO Jonathan Schwartz. Last week when Sun acquired Sweden’s MySQL AB, Schwartz’s discussion of the deal was instantly distributed to Yahoo! Finance.
So I have a suggestion for the NYSE. To the list of recommended distribution channels, just add RSS/Atom as a voluntary additional mechansim. You can even leave UPI and newspapers on the list.
Because as the letters state, “It is important to ensure the investing public has equal access to material corporate information as soon as it becomes available.”
As an aside, RSS is how I get my news direct from the NYSE.