Regulator Probes What’s Public as Traders Access Fast BOE Feed

(Bloomberg) --

As the U.K.’s financial regulator probes whether traders got an unfair advantage by listening to Bank of England press conferences, it will have to get over one immediate hurdle: whether that information was public in the first place.

The Financial Conduct Authority is investigating the audio breach after the BOE discovered that a third-party supplier gained access to a backup feed of the Q&A sessions hosted by Governor Mark Carney. While the proceedings are broadcast live, a faster audio supply of the comments could give some traders an edge on market-moving information.

But a trader listening to a press conference wouldn’t necessarily fall afoul of the U.K.’s insider-dealing laws, which concern non-public information, said Sara George, a white-collar crime lawyer at Sidley Austin.

“People sitting in the room heard the same information at the same time,” she said. “It’s a very high standard to get over when the case concerns information in the public domain.”

Monetary authorities are moving to tighten the way information is released, with the European Central Bank also taking action to ensure audio feeds couldn’t be sold on. The attention comes after high-profile insider trading cases on mergers and benchmark rates such as Libor.

The BOE’s “live” coverage, like most television broadcasts, has a several second delay to allow media companies to prevent the airing of improper sounds or images. The bank also has an audio-only emergency backup line, and the provider was supplying that faster feed to clients.

The FCA, which oversees insider-trading probes, will likely investigate whether trading had occurred based on the early information from the feed. It could also look at whether the audio provider broke market abuse rules by disseminating the information.

The BOE itself took a swift decision, banning the unidentified audio provider from future conferences. Central bank announcements are among the most market-sensitive of any news releases, with major monetary authorities employing tight arrangements for how their information is released.

“This wholly unacceptable use of the audio feed was without the bank’s knowledge or consent,” the BOE said. “On identifying this, the bank immediately disabled the third-party supplier’s access.”

The London Times on Thursday named the third-party contractor as Encoded Media, a British firm which shares directors with news service provider Statisma, according to the Companies House registry. The news broke a day before Andrew Bailey, the head of the FCA, was chosen to replace Carney as BOE governor.

Statisma can deliver feeds as much as 10 seconds faster than TV channels including Bloomberg, according to a website for a company that describes Statisma as one of its partners.

Statisma said on its own website it doesn’t release information “without it first being made available to the public.” It said: “It is impossible to ‘hack’ or ‘eavesdrop’ any live public event or press conference. Any such suggestion is dismissed out of hand.”

Ultimately, the Bank of England will need to look at the terms of its own contract with the audio provider, George said.

“It will come down to their contractual terms with the Bank of England,” she said. “Does the contract allow for the distribution of the audio feed?”

--With assistance from David Goodman and Jill Ward.

To contact the reporter on this story: Jonathan Browning in London at jbrowning9@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser

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