Up to eight seconds. That was the lead some traders reportedly held over everyone else when Mark Carney spoke, according to The Times, which broke the story in December 2019. In markets where algorithms buy and sell in tiny fractions of a second, eight seconds is a long time.
The Bank of England confirmed on 19 December that the back-up audio feed of some of its press conferences had been misused. The feed existed for one reason only: to serve as a fallback if the video feed failed. According to the Bank’s own statement, a third-party supplier had used it “since earlier this year” to supply services to other external clients, “without the Bank’s knowledge or consent”. The Bank called this “wholly unacceptable”.
What the feed was worth
The audio ran up to eight seconds ahead of the main video feed, which is handled by Bloomberg. The Times reported that the supplier shared it with a market news service, and that service sold access to traders for between £2,500 and £5,000 per press conference, on top of a subscription fee. The Bank did not name the supplier.
Carney’s remarks often move the pound and government bonds, especially when they hint at the future path of interest rates. High-frequency hedge funds run ultrafast computer systems built to exploit exactly that kind of gap. Some use microwave transmitters to save further split seconds.
The Bank’s response
The Bank said it disabled the supplier’s access as soon as it identified the problem. The supplier had no access to the most recent press conference and would play no part in future ones. It also stressed that the decisions of its policy committees were not compromised. The issue, it said, related only to the press conferences that follow those announcements.
The matter went to the Financial Conduct Authority, which began an investigation. The Guardian reported that the timing was awkward: Carney was due to leave on 31 January, after one more interest rate press conference on 30 January. The monetary policy committee kept rates unchanged that Thursday and held no press conference.
Andrew Sentance, a former member of the committee, called the failure “unprecedented” for a central bank. “Central banks pride themselves on confidentiality and making sure communication is well managed,” he said. “There has been an abuse of information here. The question in your mind will be, if this happened what else has happened?”
The Guardian recalled that in 2017 the Office for National Statistics stopped giving out figures early after research showed it was highly likely they were being leaked.
Sources
- Watchdog investigates Bank of England security breach (The Guardian)
- Leaked audio from the Bank of England gave hedge funds an 8-second head start on Mark Carney's statements (Markets Insider / Business Insider)
