Financial traders and institutional investors are among the keenest listeners when Donald Trump speaks, as his words can shift markets within seconds. Trump Media & Technology Group (TMTG) has now launched a paid service, Truth API, which provides real-time access to posts from the highest-ranking Truth Social accounts, including the president's own account with 13 million followers.

The service, which was anticipated to become available on 1 August, is designed for high-frequency and algorithmic trading firms that rely on automated systems to buy and sell stocks at a great scale and speed. According to Charles Schwab, these firms are often designed to make tiny profits on each transaction but can generate large returns through sheer speed and volume.

However, the move has sparked a series of legal questions and ethical musings, including whether it is right that a company, in which the president's family remains the majority shareholder, stands to profit from his own public statements. Political opponents of Trump have criticised the service, with Democratic Senators Elizabeth Warren and Adam Schiff writing to the US securities regulator to ask if it will investigate whether Truth API breaks the law.

What is Truth API?

Truth API is a new data feed that provides real-time access to posts in 'milliseconds' from the 'highest-ranking Truth Social accounts'. The service is mainly designed for high-frequency and algorithmic trading firms, which are 'most impacted by the cost of a delay in information', according to TMTG. While anyone can pay for the service, it is mainly intended for firms that have the complex systems already set up to perform transactions at 'nanosecond level fast', as pointed out by Joe Saluzzi, co-founder of Themis Trading.

TMTG has not confirmed the exact cost of the service, but the Financial Times reported that customers could be charged as much as $100,000 a month for high-speed access. The company expects the service to create a steady source of new revenue for the firm, which is currently loss-making.

Who has signed up?

There has been a wall of silence in terms of who has signed up to the service so far. TMTG says it had customers register in advance of the launch date, but has not revealed how many. Saluzzi suggests that high-frequency trading firms would be among the most likely to sign up, not only because of the money-making potential, but also because they'll be thinking 'if I don't do it, somebody else will'. However, the BBC contacted some of the major US investment banks and high-frequency trading firms, including Goldman Sachs and JP Morgan, but they declined to comment or did not respond.

Is it illegal or unethical?

The potential for insider trading to occur has also been raised. Insider trading involves people making market trades or bets based on information that is not available to the general public. A spokesperson for TMTG said in response to the letter sent to the SEC that Senate Democrats 'continue to mischaracterise Truth API either out of ideological opposition to free markets or a failure to grasp the distinction between public and nonpublic information - or, quite possibly, both'. However, Richard Painter, former ethics lawyer to President George W Bush, believes it could be classed as insider trading to sell material and official US government information, prior to it being public knowledge, on the platform.

TMTG has also said 'the Senators must have invented a new theory of 'insider trading' based on publicly available information'. However, whether or not information being provided by the service is public or non-public appears to be the key test. Saluzzi points out that many other data providers, news organisations and stock exchanges currently operate similar services, providing a 'precedent' for TMTG. However, he adds: 'There's a different story when it comes to ethics.'

Trump, who owns about 41% of Trump Media through a trust his children oversee, does stand to profit from the service. 'This appears to be an outrageous abuse of the President's office for his personal benefit that undermines everyday investors and the integrity of our markets, while enriching Wall Street and other wealthy insiders,' Warren and Schiff said in their letter to SEC.

Sources

This report was synthesised from the following coverage: