LONDON – British authorities began investigating Thursday how some hedge funds got access to market-sensitive news conferences of the Bank of England five to eight seconds ahead of others - enough to give them a huge edge in the fast-moving world of financial markets.
Following a report in The Times newspaper late Wednesday, the Bank of England confirmed an investigation was underway into what it termed the “wholly unacceptable" use of an audio feed that had been set up as a back-up to the official video broadcast.
The bank referred the case to the financial regulator, the Financial Conduct Authority.
According to the newspaper, some market participants who subscribed to a news service offering an audio feed of the Bank of England Governor Mark Carney's quarterly press conferences got access to the audio feed. That would have given them a crucial advantage over those watching via the official broadcast provided by Bloomberg News.
Having access to comments from Carney seconds early could have been lucrative for investors who use powerful computer programs to trade quickly.
So-called high-frequency trading can execute a huge number of transactions in a fraction of a second. Large organisations such as investment banks and hedge funds use artificial intelligence and automated trading platforms to track markets and execute trades.
If Carney, for example, indicates that the central bank is ready to raise interest rates, traders could see that as a potential positive for the pound and start buying the currency heavily before other investors.
Carney and others on the bank's nine-member rate-setting panel hold quarterly news conferences to discuss the outlook for U.K. interest rates. Those news conferences often lead to big moves in financial markets as traders react to changes to the outlook for interest rates. That's been especially the case over the past few years of Brexit-related uncertainty.