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Market sensitive U.S. jobs and other critical macroeconomic data are frequently available first in trading locations outside of the U.S., giving an unfair advantage in trade executions involving financial assets worth billions of dollars, some of the world's leading investment institutions complain.
"The fact that major US employment data is available outside of the US first undermines the credibility of the DoL (Department of Labor)" one such US company, which preferred to remain anonymous, stated. It's spokesperson added, "This puts the US investing public at a significant disadvantage, at such a time when gauging the recovery of the US economy has never been so important."
The release of market-sensitive data via government websites has also sparked anxiety about vulnerability to less friendly parts of the world. Hackers believed to be working for foreign governments have been monitoring internal email traffic at the U.S. Treasury and Commerce departments, Reuters first reported in December, 2020
John Netto, a trader featured in the latest Market Wizards book for algorithmic trading strategies around economic releases, stated in a recent interview: "The decision by the BLS, and corresponding government agencies, to rely on the web as their principal channel for releasing market-moving economic data brings with it significant risks that adversarial sovereign powers to the US could, under the right circumstances, commandeer this data for nefarious purposes."
MNI research supports the concerns expressed above by industry participants. Ultra-accurate GPS timestamp evidence shows releases such as initial unemployment claims are received in Frankfurt and London before Chicago and New York. The data can then be used to initiate trades and investment decisions on exchanges in Europe ahead of access by counterparts based in the U.S.
INEQUITABLE MARKET ACCESS
The mismatch follows the decision by the DoL, in January last year to stop releasing monthly and quarterly macroeconomic data via financial journalists corralled in a secure room known as a 'lock-up', switching instead to the direct release of the highly-sensitive information via its website.
But the DoL move has drawn criticism from investors of inequitable access. The weight of traffic hitting the DoL website around the time of a major economic data release slows the system down with the result that the data are delivered to more lightly loaded caches elsewhere around the globe before more congested U.S. nodes.
The criticism comes as markets were thrown into turmoil Friday [9 April] when the website of the Bureau of Labor Statistics, a division of the DoL, crashed. The official release of closely-watched March producer inflation data was delayed by 25 minutes. Reports suggested some market participants received the highly-sensitive figures well ahead of the official disclosure.
"Sorry for the delay in the PPI release, folks," the BLS tweeted, followed by a thread with details of the data.
The standard practice at the BLS for many decades was for financial journalists to be given the data ahead of release time in the locked room and with no access to the outside. They were able to contextualise the figures in their prepared headlines and reports before the release of the data, at which point the news outlets published the data via their own global networks simultaneously.
LEVEL PLAYING FIELD
Investors based in the U.S. are hopeful that, when safe from Covid, the DOL reconsiders its decision to be fairer to the wider U.S. trading community as well as for national security reasons. They point out that the expert work of financial journalists in 'lock-ups' also helps to level the playing field between the U.S. investing public and institutional trading firms.
One proposed solution would be for the simultaneous release of the data via 'lock-up' and the website, allowing for secure and equitable distribution across multiple diverse sources, with inherent redundancy, to global investors alike.
Another solution would be to allow the world's major financial news agencies to release the data under embargo, as is the case with FOMC and other key US economic data. This method of release is far more cost effective, and again is timely and secure, as proven during the pandemic, unlike the web release.
These solutions were proposed to the DoL early in 2020, by a coalition of the world's major financial news agencies, including MNI.