The US and UK central banks are scrutinising their broadcast feeds for potential weak spots after the revelation that some traders and hedge funds may have been paying for early audio access to the Bank of England’s press conferences.
The BoE has referred itself to regulators after learning that specialised market news providers were disseminating audio files of policymakers’ statements to customers up to 10 seconds before live comments were broadcast on television or internet streams — a long head start that potentially opens up lucrative trading opportunities.
Following a rapid internal investigation, the central bank confirmed what it called a “wholly unacceptable” use of its back-up audio feed of press conferences by a third-party supplier. The matter was first reported by The Times.
The Federal Reserve said it was reviewing how its officials’ comments were broadcast. Speeches from inside the Fed are securely distributed on two simultaneous feeds with no audio back-up, which reduces susceptibility to unauthorised access. However, it is harder to control the way comments reach the public if they are made at external venues such as the Economic Club of New York.
The European Central Bank has already sought to clamp down on any companies seeking an early lead on its statements, which suggests that this has been a known risk for central banks for some time. It made an audio feed of its press conferences freely available from September. The Bank of Canada said it already had a single secure feed.
The investigations have lifted the lid on a niche but lively industry claiming to give customers the chance to be the first to receive the content of market-sensitive press conferences through audio files, which are smaller and easier to distribute than video.
One provider, Statisma News, which is based in Essex in the UK, has claimed on its Twitter feed that it gives clients an early lead on comments from the BoE, ECB, Fed, the Economic Club of New York, South Africa’s central bank and the Bank of Japan, as well as statements from sites including the UK House of Commons and Downing Street. The little-known news service declined to comment on the matter on Thursday, and the BoE did not confirm whether it was probing its services in particular.
However, a person briefed on the regulatory inquiries said Statisma was one focus.
Statisma said it did not carry embargoed or non-public information. “It is impossible to ‘hack’ or ‘eavesdrop’ any live public event or press conference,” it said.
Former UK rate-setter Danny Blanchflower said on Twitter that “heads must roll” from the BoE after the “totally unacceptable breach”. The Financial Conduct Authority’s investigation is likely to look at whether market abuse rules were broken by the service provider or whether any other rules were violated by the provider or other customers.
RanSquawk, LiveSquawk and Selerity, three other providers of audio news to traders, all said on Thursday that they did not have access to BoE audio streams. The ECB said its new audio feed has a delay of about two seconds from the time words are spoken at its press conferences, adding that this was the fastest way to hear what was being said without being one of the journalists invited to the events.
High-speed traders frequently go to great lengths to gain tiny sub-second time advantages over competitors, sometimes by moving computer servers to be just metres closer to data sources, in an effort to execute trades ahead of the pack and make outsized gains. A lead as long as 10 seconds, as claimed by Statisma News, would provide ample time to trade the pound or UK government bonds with a head start.
It is unclear at this stage whether audio news services have broken any rules in distributing audio feeds ahead of TV news or whether they are simply taking advantage of public broadcasts for a specialised audience.
Additional reporting by Philip Stafford, Eva Szalay and Martin Arnold