Last week, President Trump’s social media company, Truth Social, announced a product that reminded me of the 1990 movie, “The Grifters.”
In the movie, a slick con man poses as a successful stockbroker who tells the wealthy mark that his investment firm has a computer genius who can delay information traveling between the Tokyo and New York stock exchanges by seven seconds. That short interval, the con man claims, is sufficient time for their massive computer system to place profitable trades before the market reacts.
This, of course, is a form of insider trading and illegal as the stockbroker, feigning honesty, tells his mark: “Mister Hebbing, we are talking about breaking the law here, I want to be sure you understand that. No one gets hurt, but the law does get broken.”
The Grifters was filmed in the early days of computer stock trading. A seven second window to capitalize on insider information seemed impossibly short. Today, ultra-fast computers execute thousands of trades per second, profiting from fleeting opportunities opening and closing in the market.
The strategy depends on a tiny speed edge over other traders.
That’s the edge Truth Social intends to sell with its new service, Truth API (Application Programming Interface). Starting August 1, Truth API will deliver real-time data “in milliseconds” from its top ten Truth Social accounts beginning with President Trump. The president has made Truth Social his exclusive on-line channel for announcing major policy decisions, news which frequently moves stock and commodity markets.
Truth Social is owned by Trump Media & Technology Group whose largest shareholder is Donald Trump who owns roughly 41 percent of the firm’s shares.
Many on-line services offer APIs to automate access to information from stock prices to weather forecasts. For example, Alpha Vantage offers an API that provides real-time information on stocks, funds, and other financial assets. The service is free for up to twenty-five requests a day, perfect for individual day traders. For professionals, Alpha Vantage offers a top-of-the-line service that provides up to 1,200 requests per minute at an annual cost of $2,499 per year.
In contrast, Truth API is projected to cost $100,000 per month; a discounted three-year package is priced at $2.16 million.
Will firms pay these significant fees to obtain President Trump’s pronouncements a few fractions of a second before others? They likely will. Almost from the beginning of his second term, investors have been actively trading on the president’s Truth Social posts.
For example, according to the Wall Street Journal on June 9, “the president posted at 12:38 p.m. that Iran had shot down an Apache helicopter that was patrolling the Strait of Hormuz, adding, ‘The United States must, of necessity, respond to this attack.’ Trading in energy stocks spiked almost immediately, the data the Journal reviewed show, pushing share prices up.”
With billions of dollars in potential profits, even if Truth API only gives firms a small time advantage, they’ll likely pay for the preferential access.
Giving certain groups privileged access to information is hardly new. For decades, public companies treated their institutional investors—firms like Blackrock, Fidelity and Vanguard—differently from their individual investors, the so-called “moms and pops."
Public companies hold quarterly conference calls during which corporate officers discuss the firm’s financial results, answer questions, and often forecast future earnings. Based on the news offered, the quarterly calls can drive large swings in a company’s stock.
Yet, until October 2000 individual investors, with few exceptions, were not allowed to attend the quarterly conference calls. That’s the date the Securities and Exchange Commission (SEC) instituted Regulation FD (Fair Disclosure). The regulation made it illegal for public companies to share information with institutional shareholders before releasing it to individual shareholders. An immediate consequence of Regulation FD was that public companies were required to give all shareholders equal access to their quarterly conference calls whether they owned one or a million shares.
One man largely deserves the credit for Regulation FD. In 1996, Mark Coker was denied access to a quarterly conference call conducted by a company in which he owned a small number of shares. Believing all shareholders, small and large, held the same rights to corporate information, Coker launched BestCalls.com in 1997 to provide an online directory of quarterly conference calls open to all shareholders. In addition, Coker campaigned publicly against the selective disclosure of corporate information and worked with the SEC to document how pervasive the discriminatory practice actually was. Coker’s relentless efforts over the next three years served as a catalyst for the adoption of Regulation FD in October 2000.
In a personal note, my former company, Shareholder.com, acquired BestCalls in 2003. In 2005, Shareholder.com, along with its BestCalls division, was acquired by the Nasdaq stock exchange. Mark and I remain friends, and fellow authors.
Truth Social’s plan to sell accelerated access to President Trump’s social media postings violates the spirit, but not the letter of Regulation FD; the regulation applies only to corporate information such as future acquisitions, earnings or management changes.
The STOCK Act of 2012, though, prohibits members and employees of Congress and the Executive Branch, including the president, from using nonpublic information derived from their official positions for personal benefit. President Trump selling accelerated access to market-moving information would certainly seem to be in violation of that Act.
The Supreme Court's presidential-immunity ruling of July 1, 2024, however, shields a president from criminal prosecution for official acts—absolutely for core constitutional powers, presumptively for the rest. But the new law is murky and untested. Presidential pronouncements, even on social media, are official acts. Yet selling early access to them is a private commercial transaction.
The Court's immunity ruling never contemplated the distinction.
That's not surprising; no president has ever monetized the presidency as Donald Trump.
Ron
We need you to share your writings to the NYT and others so a lay person can know what the new level of corruption by Trump and team is.
Once again thanks for your writing!!
Best Neil
kleptocracy