10 Charts That Show The Incredible Power Of Having Economic Information Seconds Before The Rest Of The Market

Thomson Reuters has been giving elite traders a 2 second advantage on the bi-monthly Consumer Confidence index, a key number for traders. In the past few days, that revelation has angered a lot of people on Wall Street.

A two second advantage may not seem like a lot of time to a human, but to a robot, with the right (read: fastest) connection to a stock exchange, it's plenty of time to spray out thousands of orders and (most likely) cancel them.

That impacts price. Suddenly, the market thinks that a given ETF, equity — whatever you're trading — is really in demand.

But it's not.

When it happens incredibly fast (like, in a second) it can be like a tsunami that rises and then disappears.

Until the correct price is found, what all of that does is simply create a mess — a sort of high speed chaos that can only be seen clearly in milliseconds but can send ripples throughout the market as the tsunami dies down.

First and foremost, paying for early data is something completely known on Wall Street, and it makes an impact. This Feb 2013 chart shows how much power people that pay to get Chicago PMI 3 minutes early have on volume. The dots are orders, colored by exchange. Imagine if you're not paying for this service, and you're just a ship sailing on the water, so to speak.

Three minutes later, when the number officially comes out. The water is calm. That said, a human being can react in 3 minutes. What's at issue with Thomson Reuters is 2 seconds.

Forget 2 seconds, this video shows what a high speed trader can do with one second of time. Specifically, it shows trading between exchanges one second after the Chicago PMI number is released, slowed down to a minute and a half.

And here's a run down of all the trading that took place (from Nanex):

• 550,000 SPY shares
• 10,000 June 2013 eMini futures contracts
• 1,400 Nasdaq 100 futures contracts
• 800 Dow Jones futures contracts
• 350 Russell 2000 futures contracts
• 125 S&P 400 Midcap futures contracts
• 300 Crude Oil futures contracts
• 900 Dollar Index futures contracts
• 800 Gold futures contracts
• 10,000 10yr T-Note futures contracts
• 2,500 5yr T-Note futures contracts
• 3,500 T-Bond futures contracts
• 5,000 Eurodollar futures contracts
• 750 Japanese Yen futures contracts
• 600 Euro futures contracts