Fast News

We argued in the textbook that an efficient market reacts rapidly to new information. So how fast does the market react? Pretty quickly according to traders. Dow Jones & Co., publisher of The Wall Street Journal, announced a lawsuit against Ransquawk, a service that "scrapes" articles published online by Dow Jones and others and immediately squawks the news to its subscribers. According to Ransquawk, 8 of the largest 10 banks it the world use the service. Dow Jones argues that Ransquawk is misappropriating "hot news," an action that is not permitted under a 1918 Supreme Court ruling. Given that Ransquawk is a fee-based service, we must assume the banks using the service believe that the extra few seconds gained in hearing about the news is worth the price of the service.