ECB warns on US economic data leaks
US investors may have earned millions of dollars in profits from early access to leaked economic data the European Central Bank (ECB) has alleged.
Researchers at the bank studied the movements of trades ahead of several market-moving US economic reports.
They included a US consumer confidence index, home sales data and initial US GDP data among others.
The study found "strong" evidence of pre-announcement price moves in at least seven cases.
The ECB research paper, Price Drift Before US Macroeconomic News, studied investment trading patterns in the case of 21 market-moving economic indicators between 2008 and 2014.
It found that in the case of a third of the economic announcements, there was strong evidence of what is known as pre-announcement price drift, in which investors correctly bought or sold stocks or bonds in apparent anticipation of an economic announcement and its impact.
Price movements began about 30 minutes before the economic data was officially released, the paper said, and accounted for about half of the total price adjustment caused by the announcement.
The ECB paper said its findings pointed to a widespread leakage of information.
Public bodies in the US are regulated by Principal Federal Economic Indicator guidelines, but the report said most cases of significant price movements involved data that was released by private companies that were not subject to the same rules.
They called for an investigation "to definitively determine" if data was being leaked and how the leaks were occurring.
"Based on a back-of-the-envelope calculation, we estimate that since 2008, in the S&P E-mini futures market alone, the profits associated with trading prior to the official announcement release time have amounted to about $20m per year," the authors said.
"While the overall evidence points to leakage and proprietary data collection as the most likely sources of pre-announcement drift, reprocessing of public information may also contribute to some extent," the paper said, arguing that leakage could not be conclusively established.
"To ensure fairness in financial markets, strict release procedures need to be implemented for all market-moving announcements, including announcements originating in the private sector."