Saturday, October 31, 2020

Hedge funds hacked into Bank of England press briefings

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An audio feed of the Bank of England‘s press conferences was leaked to hedge funds before they were broadcast, the Bank has admitted.

The Bank said one of its suppliers had “misused” the feed, which is there as a fall-back in case the video broadcast fails.

It meant traders had access to the words of Mark Carney and his officials between five and eight seconds early.

The Bank of England said it had disabled the supplier’s access.

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The hijacking of the audio feed, first reported in the Times, gave an advantage to high-speed traders, such as currency speculators, who can make millions of pounds on tiny market moves.

Comments from Bank officials about market sensitive matters such as interest rate decisions can affect the value of sterling and other market assets within fractions of a second.

The Times said it understood that the eavesdropping on the press conferences had been happening at least since the beginning of this year.

Investigation

The Bank of England said that the leak “was wholly unacceptable use of the audio feed” and the way hedge funds were allowed to make use of it was “without the Bank’s knowledge or consent, and is being investigated further”.

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The matter has been referred to the market regulator, the Financial Conduct Authority which told the BBC it was “looking at the issue”.

Being able to hear the press conference early would provide an unfair advantage. Interest rates, economic guidance, and the financial health of banks and the markets are frequently discussed at the press conferences.

Each month the Bank announces its decision on interest rates, after which it holds a press conference that begins with a statement from the governor. Then journalists’ questions are answered.

Then, all of this is broadcast on video provided by Bloomberg, which is shared to other news outlets. The audio feed is separate from the video feed.

The company that provides the audio feed has not been identified. Bloomberg has been contacted for comment.

Valuable information

A statement from the Bank of England said: “The Bank operates the highest standards of information security around the release of the market sensitive decisions of its policy committees.” The audio supplier would not be involved in any further press conferences, it said.

The Times said it had seen documents revealing how the service was sold on to traders. The supply cost between £2,500 and £5,000 each press conference for each client in addition to a subscription fee.

It also said press conferences from the European Central Bank, the US Federal Reserve and the Bank of Canada were on offer.

Liz Martins, HSBC’s chief economist, told the BBC that the press conference information could be extremely valuable.

“What the market wants to know is what is the central bank going to do next. Are they going to raise interest rates, are they going to cut interest rates, is there going to be more QE?” she said.

“If you have a clue as to whether they are going to do that you can make money with that. Sterling will move, the bond markets will move.”

Source: BBC

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