Wall Street Journal Op Ed Article by Alberto Lopez

Let the FOMC Morning Glitch Become Policy
The accidental release of information avoided the usual afternoon market volatility.
Due to an apparent leak, the Federal Reserve released its Federal Open Market Committee meeting minutes on Wed., April 10, at 9 a.m., rather than the usual 2 p.m. This gave us a rare opportunity to see how much better it would be for these types of market-moving events to take place before the bell ...

Launch the Wall Street Journal's Article

Today, the Wall Street Journal published my Op Ed Article about the effects that Federal Open Market Committee's announcements have on securities markets and how much better things would be if these were to happen before the markets opened. Here is the link if you wish to read the whole article.

2013-Dec-20 Update:
Now that I can post it, here is the actual text from the article

Let the FOMC Morning Glitch Become Policy
The accidental release of information avoided the usual afternoon market volatility.

By ALBERTO LOPEZ
Due to an apparent leak, the Federal Reserve released its Federal Open Market Committee meeting minutes on Wed., April 10, at 9 a.m., rather than the usual 2 p.m. This gave us a rare opportunity to see how much better it would be for these types of market-moving events to take place before the bell.

Instead of the directionless and wild trading that typically surrounds FOMC announcements, the market steadily trended in one direction as soon as the bell rang. After rising for four hours, the S&P moved sideways, followed by a strong push higher the following day. There were no sharp pullbacks or jerking movements.

As an individual trader operating from home, I've long known that it is wisest to sell all the stocks and options I'm trading to stay safely away from the inevitable and volatile price swings that take place before and after an announcement by the FOMC. Besides the violent equity-price movements that seem to be caused by computer robots making rapid bets around the announcement, all options lose value after the event has passed.

In all, it is too much to bear—especially for unsophisticated individual investors who lost much of their money after the crash and have just now begun to try the waters.

If the last decade was a sufficiently stern lesson to the retail investor that buy-and-hold is not a viable strategy, he will probably place stop-loss orders to protect his investments from flash crashes or other sudden market drops. Unfortunately, when equity prices move quickly between extremes, these stop losses can trigger sales at the most undesirable price. If the market immediately swings upward after a stop-loss sale is triggered, it only confirms an investor's fear that the game is rigged.

The unnecessary volatility brought about by FOMC announcements during normal trading hours may benefit those who own fast-trading computers, albeit at the expense of ordinary investors. And the timing of FOMC announcements for mid-afternoon serves no fundamental market purpose.

The Fed should know better. If it released FOMC announcements in the early morning before U.S. markets officially open, investors would have an opportunity to digest the information along with all the other developments that day before trading begins.

Any losses due to volatility would be suffered by professionals since most retail investors do not trade during the pre-market trading session between 7 a.m. and 9:30 a.m. Eastern time. But the market will more likely follow its usual trending patterns during the regular trading session. Trends are much easier to stomach for the average individual trader. Volatility scares people into thinking that everything is out of control.

I think that this small change has been delayed long enough. So, Mr. Bernanke, please institute a new guideline that all market-moving Fed announcements take place at a time when they least exert their gravitational pull on the markets—at a time when Fed statements would hurt the weakest participants least.

Mr. Lopez, an active options trader, is an executive advisor to Blackmore Partners LLC, which finds private-equity funding for growing corporations.

A version of this article appeared April 17, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: Let the FOMC Morning Glitch Become Policy.