A new FBI report has discovered the shocking ease at which market-moving economic reports can leak to traders before public release, the Wall Street Journal reports.
The government requires “black boxes” for media organisations that release economic indicators such as the monthly jobs report.
In theory, the box acts as a trapdoor so data deluges at the same exact time across platforms.
You know, fairly.
But the FBI found it’s possible to circumvent the technology (via elaborate hacks like turning the thing off).
This should all sound familiar. Perennially dogged by weird trades milliseconds before data dumps, regulators have long suspected media firms or their rogue employees are in cahoots with traders who can profit from even the smallest of head starts.
In fact, the FBI was tipped off when Bloomberg, one such firm, went to set up new devices at the Commerce Department and realised they could get around the black box by using a different electrical current.
Bloomberg reported the flaws to the Commerce Department last summer and didn’t use the devices in any data releases, Bloomberg told investigators, according to the report. After Bloomberg alerted the department, the FBI conducted a “consensual seizure” of its computers for testing.
The inspector general at the Commerce Department found “no evidence of an intentional violation” of the law by Bloomberg or its reporters, according to the report. In October, the FBI informed the Justice Department it found “no evidence of any embargo violation(s)” and the case was closed.
In June, Thomson Reuters raised eyebrows when it was revealed their elite clients receive the University of Michigan’s consumer confidence data two seconds early, plenty of time to score big profits in algorithmic trading land.