Traders sneaking peeks at government economic reports?

posted at 10:01 am on August 6, 2013 by Ed Morrissey

Under normal circumstances, this story would provoke outrage and demand for action.  After an avalanche of revelations about how the government spies on Americans, this turnabout story might just be the feel-good post of the day.  The Wall Street Journal reports that the FBI suspects traders may be spying on government agencies to get sneak peeks at economic indicator reports in order to gain an edge on the markets, especially on the monthly jobs reports:

The Federal Bureau of Investigation has discovered vulnerabilities in the government’s system for preventing market-moving economic reports from leaking to traders before public release.

Law-enforcement officials found “a number of operational vulnerabilities” involving “black boxes” used by several departments to control the release of sensitive economic data such as the monthly unemployment rate, according to a report by the inspector general at the Commerce Department.

The report said it was possible to subvert the system, which was designed to prevent media companies from sending economic data to traders early.

Actually, it’s not a feel-good story at all.  The information comes directly to traders connected to government systems through the black boxes, which are designed to give everyone the same data at the same time.  Those with advance knowledge of the numbers can make trades on the data before their public release affects price, which means that unwitting partners in those transactions lose real value in the trade by either buying too high or selling too low.

Originally, the probe focused on Bloomberg, but the media organization found the flaw and reported it independently without using it.  The FBI cleared Bloomberg last fall, but that still leaves open the issue of the suspicious trading. It also leaves open the question of the design of the security system itself.

The probe discovered that the boxes were not that difficult to defeat.  Simply pulling the plug on it worked, as did more sophisticated end runs around the box, such as moving the cable or installing a wireless device to the cable before it hit the box, presumably preventing the connection of insider access to a particular reporter.  The FBI warned in its May report that some of those concealed devices may still be in the lock-up rooms.  None of this sounds exactly like a robust security environment, and the wonder may be why more people weren’t getting around the boxes than there are now.


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Flaw? What flaw?

Crony capitalism is working exactly as it is supposed to.

You pay to play, my man.

It’s the Chicago way.

Stepan on August 6, 2013 at 10:05 AM

I’m more concerned about the traitors sneaking peeks at Americans.

Flange on August 6, 2013 at 10:05 AM

It’s the high frequency traders.

Oil Can on August 6, 2013 at 10:06 AM

…gotta help the numbers!

KOOLAID2 on August 6, 2013 at 10:07 AM

Trust us.

Curtiss on August 6, 2013 at 10:09 AM

When the govt is lawless…

Akzed on August 6, 2013 at 10:12 AM

Didn’t the Duke brothers try this in Trading Places?

http://www.youtube.com/watch?v=7EjdC0pjo1A

Maybe, when the plot to corner the market is foiled, Al Franken will end up in the cage with the gorilla this time.

BuckeyeSam on August 6, 2013 at 10:13 AM

Just another phony scandal made up by the GOP. Nothing to see here. Move along.

Wino on August 6, 2013 at 10:16 AM

It’s the high frequency traders.

Oil Can on August 6, 2013 at 10:06 AM

Yes. Zero Hedge has been reporting on this for ages. It’s practically an open secret these days that “sensitive” data is leaked to the big boys well in advance of its “official” release.

Doomberg on August 6, 2013 at 10:17 AM

Under normal circumstances, this story would provoke outrage and demand for action. After an avalanche of revelations about how the government spies on Americans, this turnabout story might just be the feel-good post of the day.

So, this is where we are? Outraged when the government breaks the law, but ‘feel-good’ when citizens (who are using the info to take advantage of everyone else, by the way) break the law, too?

Personally, I’m pretty f*cking pissed off at both occurrences, not very ‘feel-good’ at the increasing level of law-breaking and gamesmanship and anarchy from a ‘rule of law’ perspective.

Midas on August 6, 2013 at 10:17 AM

Dan Akroyd and Eddie Murphy say:

Buy frozen orange juice futures. The government report will say that the winter was not as damaging to crops as originally thought. Corner the market.

freedomfirst on August 6, 2013 at 10:21 AM

Didn’t the Duke brothers try this in Trading Places?

http://www.youtube.com/watch?v=7EjdC0pjo1A

Maybe, when the plot to corner the market is foiled, Al Franken will end up in the cage with the gorilla this time.

BuckeyeSam on August 6, 2013 at 10:13 AM

Dan Akroyd and Eddie Murphy say:

Buy frozen orange juice futures. The government report will say that the winter was not as damaging to crops as originally thought. Corner the market.

freedomfirst on August 6, 2013 at 10:21 AM

Ha! Thinking alike.
I forgot about that despicable Franken appearing in the movie. Yes, I’d like to see that fate truly befall him.

freedomfirst on August 6, 2013 at 10:24 AM

A five hour drink for your paranoia.

I have been under surveillance for some time and cursing the police and courts.

Just this weekend I had the experience of reviewing my Comcast “Voice” account and discovered these strange phone call logs with a “invalid number” calling me and a prior call identified from months back in the subject column. The purpose of this insertion was, like the whole program from the demented woman and her helpers, to vex and annoy me and not for any law enforcement goals.

Now it is normal for Title III phone tap authorizations, if authorized by a court, to expire in 40 or 90 days and a move like that is unheard of. But what if the NSA stuff is not limited to the cops and courts?

I am now suspecting that hackers and corporations and even law firms her one time (I don’t know of her current status) spouse is/was at Buchannon or some place like that — nay be using wire tap or other surveillance technology to intercept phone calls without warrants. Moreover, if they are using it on a low value target like me, they could be listening to their adversaries in some amount and even to amuse themselves by taps on their wn clients.

Watch your mouth.

IlikedAUH2O on August 6, 2013 at 10:27 AM

So, this is where we are? Outraged when the government breaks the law, but ‘feel-good’ when citizens (who are using the info to take advantage of everyone else, by the way) break the law, too?

Personally, I’m pretty f*cking pissed off at both occurrences, not very ‘feel-good’ at the increasing level of law-breaking and gamesmanship and anarchy from a ‘rule of law’ perspective.

Midas on August 6, 2013 at 10:17 AM

Agreed with this too. The government is working hand in hand with these goons. I’m sure at least some of these ill-gotten gains are channelled to the government in the form of campaign donations.

Doomberg on August 6, 2013 at 10:27 AM

So, this is where we are? Outraged when the government breaks the law, but ‘feel-good’ when citizens (who are using the info to take advantage of everyone else, by the way) break the law, too?

Personally, I’m pretty f*cking pissed off at both occurrences, not very ‘feel-good’ at the increasing level of law-breaking and gamesmanship and anarchy from a ‘rule of law’ perspective.

Midas on August 6, 2013 at 10:17 AM

I was being snarky, not serious, which is why I also wrote, “Actually, it’s not a feel-good story at all.”

Ed Morrissey on August 6, 2013 at 10:34 AM

the FBI suspects traders may be spying on government agencies

In Soviet Russia, government agencies spy on traders.

Oh, wait. . .

rbj on August 6, 2013 at 10:35 AM

Government at work, ask them to build a simple machine to release data and they cobble something together that my 5 year old could defeat using her Barbie laptop.

Bishop on August 6, 2013 at 10:37 AM

Flaw? What flaw?

Crony capitalism is working exactly as it is supposed to.

You pay to play, my man.

It’s the Chicago way.

Stepan on August 6, 2013 at 10:05 AM

I’m sure it wasn’t designed to be insecure. I mean, if that was the case, then the probe would focus on the person or group reporting the problem — the whistleblower — instead of the people taking advantage of the flaw.

Hey, wait a minute….

There Goes the Neighborhood on August 6, 2013 at 10:48 AM

freedomfirst on August 6, 2013 at 10:24 AM

Trading Places

is hilarious. I love Billy Ray Valentine’s transformation. For example, once he’s realized that his place is his, he’s asking “Who’s been puttin’ their coals out on my flo?”

BuckeyeSam on August 6, 2013 at 10:54 AM

Personally, I’m pretty f*cking pissed off at both occurrences, not very ‘feel-good’ at the increasing level of law-breaking and gamesmanship and anarchy from a ‘rule of law’ perspective.

Midas on August 6, 2013 at 10:17 AM

Law is just a “concept,” dude. And we are all out.

What we have now is a corrupt aristocracy. They use different nomenclature, but effectively it’s the same.

dogsoldier on August 6, 2013 at 11:01 AM

So, this is where we are? Outraged when the government breaks the law, but ‘feel-good’ when citizens (who are using the info to take advantage of everyone else, by the way) break the law, too?

Personally, I’m pretty f*cking pissed off at both occurrences, not very ‘feel-good’ at the increasing level of law-breaking and gamesmanship and anarchy from a ‘rule of law’ perspective.

Midas on August 6, 2013 at 10:17 AM

I was being snarky, not serious, which is why I also wrote, “Actually, it’s not a feel-good story at all.”

Ed Morrissey on August 6, 2013 at 10:34 AM

.
Perhaps your take away should be an expectation that your readers expect boiling over moral outrage on your part rather than snark, Ed?

PolAgnostic on August 6, 2013 at 11:06 AM

“Who’s been puttin’ their coals out on my flo?”

BuckeyeSam on August 6, 2013 at 10:54 AM

Yes. Back in school, after a ‘social gathering’, a friend and I would always confirm “it was a stone groove, my man”.

Incidentally, I’m weary of my outrage against all these goons. Every once in a while, I have to revert to humor to cover/replace my cynicism.

freedomfirst on August 6, 2013 at 11:13 AM

And this leaking like a sieve crew of crooks and shysters is who we want to trust our medical records to?

I think NOT!

MaaddMaaxx on August 6, 2013 at 11:26 AM

The other part being missed in this story, is the obvious ‘cooking of the books’ that is taking place in so many of these reports, particularly in the monthly job reports.

That’s probably one of the main reasons why traders are trying to get an advanced look at the reports – because they’re cooked / rigged, there are no ways to predict what the reports will say. The raw data doesn’t help – because it has to go through the political washing machine to ensure that the message matches the political means and ends.

So, the only way to predict what the cooked reports will show is to get an early look at the report.

One action leads to another…

Athos on August 6, 2013 at 11:57 AM

It’s those damn Dukes, again.

Another Drew on August 6, 2013 at 11:58 AM

The problem is not secure systems, it’s insecure people.

And in the end, if everyone thinks it’s okay to cheat, then no box in the world is going to fix it.

Difficultas_Est_Imperium on August 6, 2013 at 12:00 PM

Perhaps your take away should be an expectation that your readers expect boiling over moral outrage on your part rather than snark, Ed?

PolAgnostic on August 6, 2013 at 11:06 AM

Gee, you’re right – more snark is what’s missing from the equation regarding solving the problems of the day. My bad.

Turn up the snark, lads – the solution is but a tad more snark away!

Midas on August 6, 2013 at 12:14 PM

The whole black box concept is designed to be exploited. If it weren’t, our government would simply post the figures on the appropriate web site at the appropriate moment. Never mind, appropriate has become an unrealistic expectation…

HotJavaJack on August 6, 2013 at 12:33 PM

What kind of intel was Huma providing as a consultant to Teneo and others as part of her moonlighting job?

Christien on August 6, 2013 at 12:35 PM

The whole black box concept is designed to be exploited. If it weren’t, our government would simply post the figures on the appropriate web site at the appropriate moment. Never mind, appropriate has become an unrealistic expectation…

HotJavaJack on August 6, 2013 at 12:33 PM

There is no reason any entity, be it presstitute organ, favored trading house, or administration, should have advance notice.

Steve Eggleston on August 6, 2013 at 1:10 PM

Enough are getting around them.

This is a form of insider trading and should be prosecuted as such.

unclesmrgol on August 6, 2013 at 2:00 PM

This is obviously a one-time breach in data (the gov’t gets the best and brightest in all technical occupations). So don’t worry about the data they will collect under Obamacare (the IRS is very good at keeping records and keeping them secure).

I always wondered why Wall St. sent so much money to Obama come election time. I guess I am starting to figure it out.

teejk on August 6, 2013 at 2:55 PM