From 2007 to June 2013, a small group of fee-paying, high-speed traders receive the Michigan Index of Consumer Sentiment two seconds before its broader release. Within this early peek window, we find highly concentrated trading and a fast price discovery of less than 200 milliseconds. Outside this narrow window, general investors trade at fully adjusted prices. We further establish a causal relationship between the early peek mechanism and the fast price discovery by isolating the impact of the early peek arrangement along two dimensions. In cross section, we use other news releases without the early peek (as controls); in time series, we use the sudden suspension of the early peek arrangement in July 2013 (as the treatment). Our difference-in-difference tests directly connect the early peek arrangement to more efficient price discovery — it results in faster price discovery, lower volatility, and faster resolution of uncertainty. These results show that contrary to the common perception, tiered information release may help to reduce, rather than enhance, the informational advantage of faster traders and improve the efficiency of the price discovery process in financial markets.

We find large overnight returns with no abnormal variance before nonfarm payrolls, ISM, and GDP announcements, similar to the pre-FOMC returns. To explain this common pattern, we propose a two-risk model with the uncertainty about the magnitude of the impending news’ market impact as an additional risk, and link the pre-announcement return directly to the accumulation of heightened uncertainty and its later resolution prior to the announcement. We empirically test and verify the model’s distinct predictions on the joint intertemporal behavior of return, variance, and particularly VIX – a gauge of impact uncertainty by our model, surrounding macroeconomic announcements.