Hedge funds have been snooping on the Bank of England’s press conferences before they are officially broadcast, in an “embarrassing” development for the central bank.
The BoE has discovered that one of its suppliers has been leaking an audio feed of its press conferences to high-speed traders who hope to profit by responding to the governor’s comments before their rivals.
The Times says that hearing what senior officials, including Governor Mark Carney, say before others can be “highly lucrative” for speed traders, who can “make fortunes from early access to information”.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
SUBSCRIBE & SAVE
Sign up for The Week's Free Newsletters
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Latest Videos FromThe Week
“The revelation that the Bank of England’s systems have been abused to give one set of traders an advantage over another will be an embarrassment because one of its roles is to support fair and efficient markets,” says the newspaper.
The Daily Mail adds that the comments of Carney and co “have the power to shift the value of sterling and other financial markets”.
The Bank has said it “operates the highest standards of information security around the release of the market-sensitive decisions of its policy committees” and the issue identified “related only to the broadcast of press conferences that follow such statements”.
–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Start your trial subscription today –––––––––––––––––––––––––––––––
The third-party supplier is believed to be linked to a market news service that promises clients will gain an edge over rival traders in a field where getting information even microseconds before others can massively inflate profits.
Trading that takes advantage of early access to information is known as high-frequency trading. Though not technically illegal, it is controversial and has been compared to insider dealing because it is a way of trading on information that others do not have.
Although the BoE’s official video feed of press conferences is managed by Bloomberg, the Bank employed contractors to install a separate back-up audio feed several years ago in case the video feed went down.
This back-up feed was never intended to be used by an outsider unless the video failed, but a supplier has allegedly hacked into the audio feed since at least January to provide the service to one of its other companies.
The Bank said: “This wholly unacceptable use of the audio feed was without the Bank’s knowledge or consent, and is being investigated further”. It said that it had “disabled the third-party supplier’s access”.
