Big investment banks are scrambling to establish whether their traders have used the high-speed audio feed of central bank press conferences that is at the centre of a probe by the Bank of England and the Financial Conduct Authority.
HSBC and JPMorgan are two of the banks that accessed the audio feed, potentially giving them vital seconds of trading advantage, according to a person briefed on the regulatory inquiries. The two banks declined to comment.
The BoE said this week that an unnamed third party had made “wholly unacceptable” use of a back-up feed from its speeches.
The central bank has not named the third party or audio distributor at the centre of the inquiries, but a person briefed on the regulatory review said Statisma News, a little-known news provider with a registered address next to a fish and chip shop in Hornchurch, outer London, is a focus. The company said it does not provide any non-public information and that it does not “hack” or “eavesdrop” on the BoE. It declined to comment further.
Traders with access to the Statisma-provided stream may have enjoyed a lead of several seconds over competitors listening to other broadcasts — plenty of time to place potentially lucrative bets. Up until now those traders are thought to have been at hedge funds and high-frequency trading houses.
But big-name banks were also offered the feed for its transmission speed, which gave a trading advantage, according to people familiar with Statisma’s business. Some banks turned it down for fear of possible reputational repercussions — a big concern for lenders still bruised by the costly and embarrassing Libor and currencies scandals.
The BoE earlier this month referred itself to the FCA over the matter. While the FCA is still at an early stage of inquiries any probe will include users of the feed — including banks — according to people briefed on the matter. The FCA will scrutinise whether any market-abuse rules were broken although legal experts have said there may well have been no illegality given that the press conferences were public events after policy decisions had been published.
The FCA’s interest in the users of the service, as well as the providers, heightens the pressure on banks to clarify whether their traders had access to the Statisma service. Numerous hedge funds questioned by the Financial Times said they had never heard of Statisma.
It is common for bank traders to seek the fastest public streams of relevant speeches or press conferences, for example by lining up different TV stations and focusing on which pumps out content fastest. One person familiar with the matter said Statisma had been actively seeking customers among investment banks across London, promoting its unusually rapid transmission speeds: the company has also touted its early access to BoE press conferences and Federal Reserve speeches on its official Twitter account.
Barclays, a UK bank with a keen interest in BoE comments, declined to use the service because it had concerns over it, according to people briefed on the lender’s processes. A spokesman confirmed that Barclays was not a client of Statisma’s.
Additional reporting by Nicholas Megaw in London