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Probe launched into hedge funds hijacking Bank of England audio

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Mark Carney, Governor of the Bank of England speaks at a Bank of England Financial Stability Report news conference in London, Britain December 16, 2019. Photo: Kirsty Wigglesworth/Pool via REUTERS

Britain’s financial watchdog is investigating reports hedge funds had unfair access to audio of Bank of England events, potentially giving them an edge in financial markets.

The Times reported on Thursday that a backup audio feed used to broadcast Bank of England press conferences was unknowingly sold to hedge funds and traders by a third party supplier.

The Bank of England regularly holds press conferences where governor Mark Carney and other executives discuss interest rate policy, growth forecasts, and other economic issues. These events can regularly move financial markets.

The central bank broadcasts videos of these press conferences to ensure everyone can have access to the information at the same time. The Bank of England employs a back-up audio feed that is only intended to be used if the video goes down.

The audio feed is slightly ahead of the regular video feed provided by financial news service Bloomberg. The Times said traders would have had a five to eight-second head start.

While it may not sound like much time, it could make a huge difference. High-frequency trading — essentially placing trades before everyone else based on public information — is a lucrative trading strategy.

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The Bank of England confirmed in a statement that it had discovered issues with its back-up audio being misused.

“We have recently identified that an audio feed of certain of the Bank press conferences - installed only to act as a back-up in case the video feed failed - has been misused by a third party supplier to the Bank since earlier this year to supply services to other external clients,” a spokesperson said.

“This wholly unacceptable use of the audio feed was without the Bank’s knowledge or consent, and is being investigated further.”

The central bank has referred the incident to the Financial Conduct Authority (FCA), Britain’s top financial watchdog. A spokesperson for the FCA said: “We are looking at the issue.”

The Bank of England held a press conference on Monday discussing global risks to the UK’s financial stability.

A spokesperson for the bank said: “The third party supplier did not have any access to the most recent press conference and will no longer play any part in any of the Bank’s future press conferences.

“The Bank operates the highest standards of information security around the release of the market sensitive decisions of its policy committees. The issue identified related only to the broadcast of press conferences that follow such statements.”

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