A new study claims a select group of investors, among them hedge funds and high-frequency traders, gets to see filings with the Securities and Exchange Commission before the public does. The researchers found that traders and news services paying an SEC vendor for a monthly subscription to data feeds typically receive access to EDGAR filings up to a minute before the general public does.

The claim is made in a research paper, “Run EDGAR Run:  SEC Dissemination in a High-Frequency World,” authored by Jonathan Rogers of the University of Colorado, and Douglas Skinner and Sarah Zechman of the University of Chicago’s Booth School of Business. Analyzing Form 4 insider trading filings they studied the process through which SEC-filed disclosures – including earnings releases (Form 8-Ks), quarterly and annual financial statements (Form 10-Q and 10-K filings) – are disseminated from its electronic EDGAR filing portal.

Their conclusion: “While the delay from a filing’s acceptance by EDGAR to its initial public availability on the SEC website is relatively short, a median posting time of 40 seconds, in the majority of cases the filing is available to Tier 1 subscribers before its availability on the public SEC site.” Prices, volumes, and spreads respond to the filing news beginning around 30 seconds before public posting, as a select group of market participants take advantage of the delay, they say, adding that “these results raise questions about whether the SEC dissemination process is really a level playing field for all investors.”

The delay in public release is notable given the advent of high-frequency trading, where advantages are measured in milliseconds. The authors draw a comparison to the controversy surrounding a now-altered arrangement where Thompson-Reuters sold advance access to the University of Michigan’s Consumer Sentiment Index, a closely watched indicator of aggregate consumer spending.

The problem, as detailed in the study, dates back to the creation of EDGAR and a Public Dissemination Service intended “to provide the public an accurate, complete, and fast method of obtaining all accepted and valid EDGAR filings.” A private vendor runs the PDS (from March 2012 through December 2013, when the study was conducted, that vendor was NTT Data). Access is subscription based, with fees set by the vendor. Roughly 40 customers, such as newswires and hedge funds, currently pay approximately $1,500 a month.

According to the SEC’s description of the subscriber service, subscribers receive filings that are accepted by EDGAR “at the same time” they are sent to the SEC site with “real-time transmission” of all valid public documents. “At least in theory, the system operates to ensure simultaneous access for all interested parties, whether or not they subscribe to the system,” the researchers wrote. Nevertheless, a delay was measurable, although their analysis failed to pin it to a specific cause.

Some delay in dissemination is expected, for all EDGAR users, as filings are parsed to extract key information and run through a “rigorous series of syntactic and semantic validation rules” before being accepted, according to the SEC. The document is then “reassembled with informative header tags” before being transmitted to the PDS and the SEC website. This process usually takes two-minutes or less.

The good news, according to the researchers, is that although the advance data is acted upon, most price movements occur after news is disseminated to the public. “This is in some ways comforting, because it suggests that those who trade only after the news about insider trades are made public are able to capture a relatively large amount of the associated return,” they wrote.