Hedge funds have a big leg up on individual investors in the stock market in the form of special access to short interest data.
That means information on whether or not people are shorting a company’s stock — or betting that it will fall. It’s one of the best indicators of performance for any security, but the exchanges usually report the numbers about two weeks late, reports Bloomberg’s Sam Mamudi and Saijel Kishan.
That’s not very helpful, in a market where high-frequency traders make moves within fractions of seconds and access to information is key.
So hedge funds are paying up in order to get access to up-do-date data that small investors just can’t afford.
Short sellers can have seriously negative impacts on a stock’s price, but their positions are not always made public immediately.
A recent example of that is investor Whitney Tilson’s short of Lumber Liquidators, a lumber manufacturer that reportedly used formaldehyde in its flooring.
Even before “60 Minutes” aired an investigation into the company that tanked its stock, citing Tilson, the subscription data showed a record level of short interest in the stock. But small-time investors would not have seen that information for weeks.