Five to eight seconds. That is how much sooner hedge funds reportedly heard Mark Carney’s press conferences through a Bank of England back-up audio feed than everyone watching the main video stream.
The Bank confirmed on December 19, 2019 that a third-party supplier had misused the back-up feed, after The Times uncovered the breach. A rapid internal investigation followed. The Bank then referred the matter to the Financial Conduct Authority, which is investigating, and cut the supplier off. The company will play no part in future press conferences and did not have access to the most recent one. The Bank said the misuse had been going on since earlier in the year.
Who sold what
The Times reported that documents showed the supplier sold access to high-speed trading firms for between £2,500 and £5,000 per press conference, on top of a subscription fee. Feeds from the US Federal Reserve, the European Central Bank and the Bank of Canada were also reportedly for sale.
The Bank did not name the supplier. Statisma News, an Essex-based company that sells live streams of central bank press conferences, posted a statement after the Financial Times asked questions. “It is impossible to ‘hack’ or ‘eavesdrop’ any live public event or press conference,” it said, adding that it carries no embargoed information. Statisma had said in April it could deliver feeds “up to 10 seconds faster than watching them on live TV.”
The Times also reported that Livesquawk, a firm tied to an accredited news organisation, received embargoed releases before publication until it lost access last year. Its director, Harry Daniels, said: “We have never hijacked anything, we have no access to infrastructure at the Bank.”
Why a few seconds matter
Carney’s remarks can move currency and bond markets when they hint at where interest rates are heading. Many hedge funds run high-frequency strategies, using ultrafast computer systems to trade ahead of rivals by microseconds. Some use microwave transmitters for a split-second edge.
The European Central Bank said it had offered a free low-latency audio feed since September, and that nobody had any reason to buy a commercial one.
The FCA is likely to look at whether the early information counted as inside information, and whether managers at the firms involved acted properly, a senior regulatory lawyer told the Guardian. Managers could face personal action.
Fallout at Threadneedle Street
Danny Blanchflower, a former member of the Bank’s monetary policy committee, said the chief operating officer should resign at once. Joanna Place has been responsible for the Bank’s information security since July 2017. “Carney should be absolutely furious,” Blanchflower said. The Bank declined to comment on the call.
Andrew Sentance, another former policy committee member, called the failure “unprecedented” for a central bank. “The question in your mind will be, if this happened what else has happened? Are the Bank’s communications secure?”
Carney stands down on January 31, after one more rate press conference on January 30.
Sources
- Watchdog investigates Bank of England security breach
- Bank of England confirms high-speed traders hacked audio feed
