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Chapter 11. Snakes and Ladders: Spinning... > Red Flag 6: You Are Probably Behind ...

Red Flag 6: You Are Probably Behind Wall Street’s Top Clients on Research News

It is clear that major brokerages still provide their top clients with an early heads-up on major ratings changes before releasing the information to their small investor clients and the media. This isn’t a democracy. If you have more money, you get faster advice: Those are the rules of the game. Traders within a brokerage also have plenty of opportunity to find out about analysts’ calls ahead of time. So, when you see a ratings change headline pop into your email from your brokerage (and often small investors don’t even get access to research reports) or when you see a headline on the television or Internet, understand that you may be hours behind those with more money and influence. You will often find, for example, that the stock price has already started to move on electronic trading platforms such as Instinet in trading occurring before normal U.S. market hours. That head start doesn’t mean you never trade off such announcements, but it does mean that your disadvantage will be stark.


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