Five to eight seconds. That was the head start some hedge funds had on the rest of the market when Bank of England governor Mark Carney spoke at his quarterly press conferences, according to a report in The Times that triggered an investigation on Thursday, December 19, 2019.
The Bank said it had found that a back-up audio feed, set up as a fallback to the official video broadcast, “has been misused by a third party supplier to the Bank since earlier this year to supply services to other external clients.” It called the use “wholly unacceptable” and said it happened without the Bank’s knowledge or consent. The supplier’s access has been disabled, and it will play no part in future press conferences. The Bank referred the matter to the Financial Conduct Authority, which is now looking into it.
Why seconds matter
The official broadcast is run by Bloomberg. The audio feed ran up to eight seconds faster, The Guardian reported. For firms using high-frequency trading, which executes a huge number of transactions in a fraction of a second, that is a long time. If Carney hinted that interest rates might rise, a trader hearing it early could start buying pounds before anyone else reacted.
Sue Noffke, a UK equities fund manager at Schroders, told BBC Radio that such comments “can determine interest rates, the value of the pound, and a lot of financial instruments.” Nobody has said whether anyone actually profited. The Associated Press noted it was unclear whether anyone had made money from the feed.
Who was behind the feed
The Bank did not name the supplier. According to The Times, the supplier was linked to a market news service that charged clients between £2,500 and £5,000. Statisma News, a little-known Essex company that sells live streams of central bank press conferences, put out 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 does not carry embargoed information. The Guardian said it had been unable to reach the company’s directors for comment.
Statisma had tweeted in April that it could offer feeds “up to 10 seconds faster than watching them on live TV,” covering the Bank, the US Federal Reserve and the European Central Bank. The ECB said it had offered a low-latency audio feed since September, which is free for everyone, so there was no reason to use a commercial one.
The Times also reported that another firm, Livesquawk, received embargoed releases before their official publication until the previous year, when it lost its access.
Bad timing
The disclosure landed as the Bank’s Monetary Policy Committee met. It left the benchmark rate at 0.75%. Seven of the nine members voted to hold, and two still favoured a quarter-point cut. The Bank insisted that it keeps “the highest standards of information security” around its rate decisions and that the problem concerned only the press conferences that follow them.
Sources
- Bank of England audio feed 'misused' by hedge funds
- Watchdog investigates Bank of England security breach | Bank of England | The Guardian
