As I follow up to my post yesterday, INSANE Bloomberg Breaks Embargo, where I reported that Bloomberg receives sensitive Federal Reserve data in advance of the scheduled release time. The release are stamped "embargoed" with the time that it is officially allowed to be released, but still.
This is an extremely sloppy method of release for sensitive material. As I pointed out yesterday, I am sure there are some traders that would do a lot to get that information even two minutes in advance---and it has been done in the past.
I also noted that the Bureau of Labor Statistics locks all reporters in a room, until release time and that for BLS releases. Also, unlike the Fed, the BLS does not merely send out the sensitive material stamped "Embargoed" to major news organizations
To get more details on how the BLS releases data, I spoke to Sharon Gibson of the BLS, she told me there is a room at the BLS at, 2 Massachusetts Avenue in Washington D.C., the BLS headquarters, it is called the "lock up."
Any reporter who wants to see an advance copy of a release must go to this room. Unlike the Federal Reserve, there are no copies of releases sent out to media organizations in advance of the release time.
Those in the lock up are not allowed out of the room until the release time, they are not allowed to use their cell phones, and while they can use their laptops to write up stories in advance of the release time, they can not access the internet. At the exact time of the scheduled release (The BLS determines the exact time by using the time reported at the US Naval Observatory), a "switch is flipped" and reporters have access to the internet and are free to leave, simultaneously the release is sent via email to news organizations.
The argument for the insider trading ban is that people who have the information first should not profit from disseminating the information first. This is questionable. Anything that gets information to market participants sooner can be viewed as good.ReplyDelete
Among the many employees and souses and friends of employees of the various people involved in producing these market moving statistics, do you think not a single one has devised a way to trade on the information? The sooner the public knows the sooner the market price digests all information. Bloomberg publishes some information a minute before release, every share that trades on every exchange in the world for the next minute has more correct information to set the price. Why should any one of them wait? Who will compensate the people who bought 10 points too high because of secrecy agreements?