The Wall Street Journal ran an interesting story Monday about an extensive investigation into media companies in lock-ups and the possible premature release of sensitive and potentially market-moving economic data.
I think we’re supposed to read between the lines about why no charges are being laid as the explanation given by anonymous source(s) doesn’t really seem plausible:
A key issue, one of the people said, was whether the government could prove in court that a time advantage for a trader of a sliver of a second—as little as a few thousandths—was enough to conduct profitable trades on confidential information.
Even so, these people added, investigators continue to have general concerns about the handling of federal economic data. Federal Bureau of Investigation agents focused much of their attention on activities at the Commerce, Labor, and Treasury departments, said people familiar with the probe. “There is a vulnerability there, but agents just can’t prove that it was being used illegally,” said a person familiar with the investigation. The FBI plans to brief agencies about its findings.
The Journal‘s article also notes that a Bloomberg computer was seized, which is new to me and shows the concerns weren’t limited to the suspicious small-fry newcomer news agencies.
After following this story for years and never being able to get anything about it into print with a mainstream news organization, these are my current thoughts:
- The lock-up system is obsolete. It’s become an infrastructure for high-speed traders when it was originally created to serve the public. It’s no longer needed in the internet age so governments (and not just the U.S.) should do away with it.
- Getting rid of a lock-up system, which benefits big Wall Street firms would be extremely hard. Not only would the government have powerful media companies like Bloomberg, Reuters and Dow Jones on its back, it would also have to deal with all their unhappy, major-donation-making Wall Street clients, who receive data from lock-ups and trade on it.
- While the Department of Labor finally booted all the strange “news agencies” from its lock-ups last summer, they may still be operating in other DC lock-ups. And they continue to operate in other countries including Canada.
- It’s not clear whether data was ever intentionally released ahead of time or whether advantages were gained solely through technological superiority.
- It’s ridiculous that the German Bourse, which owns Need to Know News has consistently been able to get away with “no comment” on this issue. The German press should take a look at it.
- The FBI has been looking into this for years (as my site visitor logs will attest) so it’s strange that after so much time and effort, the result is a big fat zero.
I’ll see if I can think of anything else, but that’s all for now.