Hijacked Bank of England audio feed sold to hedge funds seconds ahead of broadcast
There are red faces at the Old Lady of Threadneedle Street following revelations an audio feed was misused for financial gain.
Thursday 19 December 2019 19:20, UK
Hedge funds gained a crucial advantage over rivals by purchasing access to an audio feed of Bank of England news conferences, it has been revealed.
An investigation by The Times newspaper found access to a back-up communications system, installed by the Bank a few years ago by a third party supplier, was sold on.
The Bank said it was "wholly unacceptable" and that it was investigating further - while there were wider repercussions as America's central bank, the US Federal Reserve, said it would be reviewing its broadcasting arrangements in the light of the revelations.
Meanwhile the European Central Bank said it had taken action back in September to address "exactly the issues" that were discovered at the Bank of England.
The Times claimed those paying for the BoE audio feed, via the third party, would receive details of the Bank's news conferences up to eight seconds before those using the television feed - potentially making them money.
It is alleged the supplier charged each client a subscription fee and up to £5,000 per use.
The system, which had been misused by the supplier since earlier this year, was installed in case the Bloomberg-managed television feed failed.
The illegitimate use of the audio can be compared to insider trading because it gave traders a boost based on information their rivals did not have.
"This wholly unacceptable use of the audio feed was without the Bank's knowledge or consent, and is being investigated further," the Bank said.
"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."
The Bank of England has refused to identify the third party supplier and its identity is not known.
The Financial Times pointed to a statement on Thursday afternoon from an audio supplier, Statisma News, after it made contact with the company requesting information.
The company said: "Statisma is a technology company specialising in the delivery of publicly available audio content.
"We DO NOT carry embargoed information and we DO NOT release information without it first being made available to the public.
"It is impossible to "hack" or "eavesdrop" any live public event or press conference. Any such suggestion is dismissed out of hand."
High-frequency trading sees huge numbers of transactions executed in a fraction of a second via powerful computer programmes monitoring multiple markets simultaneously.
The strategy is so lucrative, some companies have invested heavily in equipment such as microwave transmitters to get information a split second before prices change.
It was unclear when the line was usually turned on in advance of a news conference, potentially giving traders the ability to earwig on conversations ahead of - or after - the actual start of an event.
The Bank said it had referred the matter to the Financial Conduct Authority.
The revelation was made hours before the Bank released its latest monetary policy decision, when it left interest rates unchanged at 0.75%.