Tuesday, September 24, 2013

Chicago Traders Received Advance Word on Fed Tapering

Within minutes of the Fed statement indicating that the Fed did not taper, I pointed out that it appeared some traders had advance word. I was specifically watching the gold market and referenced that, but other markets moved just before the official release of the Fed statement as well.

Now, word is out thatit does appear some Chicago traders did indeed receive advance word.

CNBC reports:
Some traders in Chicago appear to have had access to the Fed's decision before anyone else in the Windy City. According to trading data reviewed by CNBC, they began buying in Chicago-traded assets just before others in that city could possibly have been aware of the Fed's decision. By one estimate, as much as $600 million in assets changed hands in the milliseconds before most other traders in Chicago could learn of the Fed's September surprise—a sharp contrast to the very low volume of trading ahead of the Fed's decision[...]
It's not exactly clear how the information got to Chicago markets so quickly. But the Federal Reserve is concerned enough about the unusual event that it has begun discussions with news organizations. In response to specific questions about the unusual trading activity, the Fed released a statement to CNBC saying, "We will be conducting follow-up conversations with news organizations to ensure our procedures are completely understood."
Attempting to get advance word on government releases is an old game----a very profitable old game.This is what I wrote back in May:
  I am aware of a money manager, back in the old days, who paid a reporter to show up at the headquarters of the Bureau of Labor Statistics in Washington D.C. and grab the employment report before it was published across the wires. Back then, the BLS would release a hard copy of the number to reporters 15 to 30 minutes before it was to be officially released.  LOL, the report would have stamped on it "Embargo, not to be released until x time."  But the reporter on the payroll of the money manager, as soon as he had his copy, would run across  the street in front of the BLS headquarters to Union Station, grab a payphone and call the numbers into the money manager on Wall Street who was waiting for the call so he could put on bond trades ahead of the number being publicly released.

I am also aware, way back when, of a hedge fund-type operator, who would occasionally be tipped off minutes before news came across the Dow Jones wire. I'm not sure, who his source was and it didn't happen often, but when it did, it was valuable information that you could trade for serious $$$.

1 comment:

  1. Advance warning indeed. But what action will be taken?