High speed hedge fund traders ‘made millions eavesdropping on Bank of England press conferences seconds before they were broadcast’, probe finds
- Audio feeds of Bank of England press conferences are available seconds quicker
- Getting a few seconds’ head start would mean fast traders can make a fortune
- Audio feed has been ‘misused by a third party supplier’ without consent
Financial traders have been listening in to Bank of England press conferences before they air so they can make millions by getting their first.
The Bank has found that one of its information suppliers has been streaming an audio feed from briefings to help its own clients get a head start on their competitors.
Receiving the contents of press conferences just a few seconds ahead of rivals could allow high-speed traders to make a fortune by placing their contracts before anyone else.
The briefings feature the Bank’s governor Mark Carney and other senior officials, according to The Times.
The Bank of England (Governor Mark Carney pictured on Monday) has found that a mystery supplier had been streaming an audio feed from briefings to traders so they can get a head start on their competitors
Their comments have the power to shift the value of sterling and other financial markets.
High-frequency trading involves powerful computers making transactions in a fraction of a second to make money from tiny shifts in pricing.
Some firms have installed microwave transmitters to shave milliseconds off the time is takes to transmit orders.
In sports betting, high-speed traders send watchers to major events to give them score updates ahead of gambling firms updating their odds.
The practice is perfectly legal but some critics have compared it to insider trading because hedge funds are executing deals on information not yet known to the public.
This is the first time evidence has been uncovered of outsiders getting into the central bank’s systems in order to obtain information.
The bank said a back-up ‘audio feed of certain press conferences has been misused by a third-party supplier since earlier this year to supply services to other external clients’.
It was thought that the supplier had links to a market-news service that advertised itself to clients with the claim that it can offer an edge by obtaining information first.
Bloomberg manages the official video feed of Bank of England press conferences but a separate audio feed was put in a few years ago, with the intention that it would be used only if the video failed.
The situation has been going on since the start of 2019, and potentially for longer.
The unidentified supplier apparently sends the audio to an offshoot company. That company then sold its services to high-speed trading firms.
Audio feeds can be transmitted faster than video, allowing a head start of five to eight seconds.
The Bank of England said in a statement: ‘This wholly unacceptable use of the audio feed was without the Bank’s knowledge or consent, and is being investigated further. On identifying this, the Bank immediately disabled the third party supplier’s access.
‘As a result, the third party supplier did not have any access to the most recent press conference and will no longer play any part in any of the Bank’s future press conferences.
‘The Bank operates the highest standards of information security around the release of the market-sensitive decisions of its policy committees.
‘The issue identified related only to the broadcast of press conferences that follow such statements.’
Getting the contents of press conferences just a few seconds ahead of rivals could allow high speed traders to make a fortune by getting there first. File image used
A spokesman for the Financial Conduct Authority said that it was ‘looking at the issue’ but declined to make further comment.
The bank will today reveal its first interest rate call since Prime Minister Boris Johnson’s landslide election victory one week ago, and ahead of Brexit next month.
It is expected to keep its key lending rate at 0.75 percent, as speculation also swirls over an imminent appointment of the successor to departing Governor Mark Carney.
Mr Johnson will seek to push through Britain’s exit from the European Union on January 31 – when Carney is also due to step down.
The prime minister, whose ruling Conservative Party won the biggest majority since the 1980s heyday of Margaret Thatcher, wants to embrace Brexit and kick-start growth in Britain’s stalling economy.
Yet markets remain fearful of a no-deal Brexit after Johnson signalled he will outlaw any extension to a Brexit transition beyond the end of 2020.