Via Financial Times

The US Labour Department has announced a crucial change to how it releases government data, banning computers from the “lock-up” rooms where journalists prepare reports on economic data in strictly controlled conditions to prevent early leaks.

The changes from the Bureau of Labor Statistics, which handles data releases for much of the federal government, will take effect March 1, and could have profound effects on financial markets — particularly firms that trade quickly on economic news.

In announcing the change, William Beach, the bureau’s commissioner, quoted a 2014 report from a watchdog agency that concluded the lock-up “unintentionally creates an unfair competitive advantage for certain news organisations and their clients.” 

The department offers access to the lock-up any accredited news organisation, but access is particularly prized by newswires, for whom speed is a selling point to clients. In particular, the change will weigh heavily on Thomson Reuters, Bloomberg and Dow Jones, which offer specialised data services in addition to economic news and analysis. 

Wires compete down to the sub-second how fast they can broadcast official data. Any delays in relaying data could end up producing wide gaps between different wires’ outputs, potentially injecting fresh volatility into market conditions around major data events. 

The concerns at BLS centre on those wires that also provide machine-readable news for clients focused on super high-speed algorithmic trading. Some funds use sophisticated computer programmes to respond to data releases with no human intervention — for example, buying or selling US Treasury bonds depending on the outcome of the key monthly US jobs report. 

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“This gives high frequency shops a bit of an advantage right around the data release”, said one trader, who noted that those firms tend to not rely on the newswires as is. “It’s likely liquidity will dry up [for about a minute or two] until the information is disseminated throughout the marketplace”.

The change will prove burdensome to Bloomberg, a newswire and data service provider that is majority-owned by billionaire Michael Bloomberg, who is also a Democratic presidential candidate and frequent target of US President Donald Trump.

It also follows two decades of frustration, under several White House administrations, of the need for ever-tougher security measures to prevent early leaks of economic data transmitted wirelessly and over dedicated high-speed fibre-optic cable.

“Right now the algos are already trying to pick-up words and information flows. Having it come out together may make it a level playing field,” said Shawn Matthews, chief investment officer of Hondius Capital Management