Economic Data Is Being Released Under Tighter Security

With the advent of so-called “high-speed trading”, disseminating economic data has gone from analog to highly sophisticated. The millisecond it’s released, traders around the world act upon it; depending on how fast they receive the data could mean millions of dollars, for those who are heavily involved in news trading. Some even have trading models that are tied directly to the flow of information. So the U.S. has tightened its security as to who has access to the valuable information before it is made public. The New York Times reports, “The efforts stem from the newfound importance of high-speed trading, which began to grow significantly in the middle of the last decade and is now a central part of some hedge funds’ investment strategies. By gaining information seconds or minutes before others, high-speed traders — sometimes known as high-frequency or algorithmic traders — can use the computerized nature of modern finance to make quick profits or, if a bet goes wrong, take large losses.”

The Labor Department, for instance, suspects that there are people working inside their “lockup” room to feed the interests of high-speed traders or fund companies, rankling the balanced flow of information. As reported in the New York Times article, “The ‘root cause’ for the review, the team noted, was the possibility of traders or their agents working inside the lockup.”They cite, in 2008 Reuters reported two inflation reports a few seconds too early which made the government suspicious.

It has reached a level of even tampering with the first amendment. Because the interests of few media companies are financial only—as opposed to journalistic—the government has to review and screen what they are writing in order to determine their credentials. As reported in the article, “This proposal threatens the First Amendment,’ Mr. Moss said at the oversight hearing, adding that it would give the government ‘access to a reporters’ thoughts, drafts or notes as a condition for covering the news.”

This has led to a government overhaul of how they release their information, with a lockup room that disseminates reports on a button using a highly sophisticated computer system. You can only imagine what a few seconds can do to tip the scale of the markets, but apparently it can make a big difference.