Fed, Treasury Investigating Bloomberg Client Surveillance

Tyler Durden's picture

As reported on Friday, the most recent example of a breach in informational Chinese walls was confirmed at Bloomberg, where it was discovered that reporters have the same degree of client surveillance as workers on the API/terminal side. The reason why this is problematic is that since Bloomberg is a monopolist in the financial terminal industry, with such competitor attempts as Reuters' Eikon being massive failures, virtually every finance professional needs a terminal (even if the rate of sale of such terminals is slowing down as a result of the ongoing financial margin headaches). Which means that Bloomberg journos, an increasingly competitive service to the likes of Dow Jones, Reuters and AP, may have had an unfair advantage when it comes to tracking their "pray" - Bloomberg's own clients.

According to Reuters, such client surveillance may have been what tipped of Bloomberg about Bruno Iksil's behavioral patterns while at JPM: "At JPMorgan, the bank's public relations staffers also fumed to one another last year that reporters called repeatedly to inquire whether Bruno Iskil, the "London Whale" trader who was part of a team that lost more than $6 billion in losses, had left the bank because he had not logged onto his terminal in several days, a source with direct knowledge of these discussions said. JPMorgan did not formally bring the matter to Bloomberg's attention, the source said. Bloomberg said it had no record of a complaint."

And now, following the original Goldman complaint which Bloomberg said ended such informational commingling, it is the turn of the Treasury and the Fed to complain. Again from Reuters:

Bloomberg LP customers, including the U.S. Federal Reserve and the U.S. Treasury, were examining on Saturday whether there could have been leaks of confidential information, even as the media company restricted its reporters' access to client data and created a position to oversee compliance in a bid to assuage privacy concerns.


A Fed spokeswoman said on Saturday that "we are looking into this situation and have been in touch with Bloomberg to learn more." A source briefed on the situation said the Treasury Department was looking into the question as well.

Feigned surprise at the degree of information Bloomberg has on all its clients - Fed and Treasury included - aside, what is left unsaid in all of this is the simple question of just why is it material information what the Fed, arguably an entity that at least in a normal world should not have any day to day trade interactions with financial markets, looked up on its trading terminal.

Of course, the Fed's less than joyous response to being tracked externally via Bloomberg is well known. It was our little expose on Kevin Henry's activity status in late 2012 that caused him to go from "green", or reporting his presence, ot "gray", or invisible.

Kevin Henrgy "Green." Also, lots and lots of traders. Not so many economists.

Kevin Henry "Gray" (following this):

That said, not even we have any idea just which Equity, FX or Corp screens Henry, and the rest of the Fed staff were accessing. Or what stocks the NY Fed analyst/trader was engaged with. Only Bloomberg does.

For the sake of transparency, we hope that since Bloomberg-Steagall is very unlikely, just as it is unlikely that the big banks' trading and deposit business will ever be broken up again, at least not before the great reset, that at least Bloomberg will disclose what, if any, covert surveillance it was conducting on the Fed, and specifically which stocks the NY Fed's trading desk was daytrading.

Because in a world of the Russell 2000 trickle down wealth effect, we could all use a stock tip.

Finally, for everyone shocked, shocked that a firm can abuse client informational arbitrage, and even trade against its clients, we refer you back to our 2009 piece "Is Goldman Legally Frontrunning Its Clients?", or better yet, the January 2010 piece, "Goldman Admits To Frontrunning Clients Through Its Prop Desk":

The topic of Goldman frontrunning clients using its prop desk, which has long bothered Zero Hedge, and which in the past received Goldman's vehement refutation, seems to have resurfaced, and to have proven our initial speculations correct. Jane Lattin, assistant to Thomas Mazarakis, head of fundamental strategies, sent out an email to clients earlier, notifying them that the firm in the past has traded ahead of them in its Fundamental Strategies Group, aka its Prop Trading desk, which is, by definition, frontrunning: "The Fundamental Strategies Group is a group of cross-capital structure desk analysts employed by our Securities Divisions to assist our traders. They develop Trading Ideas in conjunction with traders. We may trade, and may have existing positions, based on Trading Ideas before we have discussed those Trading Ideas with you. We may continue to act on Trading Ideas, and may trade out of any position, based on Trading Ideas, at any time after we have discussed them with you. We will also discuss Trading Ideas with other clients, both before and after we have discussed them with you." This answers our repeated queries from July as to whether Goldman is legally front-running its clients for its own prop positions.

Full Goldman letter:

Dear client,

We may from time to time discuss with you Trading Ideas generated by our Fundamental Strategies Group. As part of our commitment to managing conflicts of interest appropriately, this message is to explain how the Fundamental Strategies Group interacts with other parts of our organisation and how that impacts on the Trading Ideas.

The Fundamental Strategies Group is a group of cross-capital structure desk analysts employed by our Securities Divisions to assist our traders. They develop Trading Ideas in conjunction with traders. We may trade, and may have existing positions, based on Trading Ideas before we have discussed those Trading Ideas with you. We may continue to act on Trading Ideas, and may trade out of any position, based on Trading Ideas, at any time after we have discussed them with you. We will also discuss Trading Ideas with other clients, both before and after we have discussed them with you.

You should not consider Trading Ideas as objective or independent research or as investment advice. When we discuss Trading Ideas with you, we will not be acting as your advisor (including, without limitation, in relation to investment, accounting, tax or legal matters) and the provision of Trading Ideas to you will not give rise to any fiduciary or equitable duties on our part. We will not be soliciting any action based on Trading Ideas and it is your responsibility to seek appropriate advice.

Any opinions that we express when we discuss Trading Ideas with you will be our present opinions only and we will not have any obligation to update you in the event of a change of circumstances or a change of our opinions. We prepare Trading Ideas based upon information that we believe to be reliable but we make no representation or warranty that such information is accurate, complete or up to date and accept no liability, other than for fraudulent misrepresentation, if it is not.

If you have any concerns about any of these matters, please do not hesitate to contact us.

Kind Regards

Jane Lattin

Assistant to Thomas Mazarakis – Head of Fundamental Strategies


Of course, following the imposition of the Volcker Rule a few months later, which has sought to eliminate precisely this kind of orderflow frontrunning behavior, this has now become a "moot point"... surely.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
deepdish's picture

LOL, the irony of Wall Street firms complaining about the lack of Chinese walls in Bloomberg...

Precious's picture

The US regulators have discussed the talking points with Bloomberg executives and will be issuing an official press release shortly.

Xibalba's picture

It's refferred to as 'deep background'

AssFire's picture

Truthful comment not placed here, (reticent of the terms of "hate speech"  ban here)... roll on big smother ahh, I mean big brother.

Troll Magnet's picture

If any of you bitchez say something, anything, about the Jews fighting one another and how they have a death grip on every aspect of our lives, I swear to Baby Jesus I'm going to report you to Tyler!

Precious's picture

Once Bloomberg's Jewish technicians disabled the frontrunning feature, viewers of the Seinfeld series on Viacom dropped 90%.

Doña K's picture

Starve the beast. Stay out of the markets

Precious's picture

Bernanke subscribes to the Bloomberg-Pro package, which includes a high speed printer and a squawk box to the Rothschild residence.

Precious's picture

Mayor Bloomberg today announced that the eavesdropping features are discontinued, and all subscribers will be automatically migrated to the next Bloomberg software release, V 16-oz.

Precious's picture

At a press conference this afternoon, Mayor Bloomberg deflected critics of the eavesdropping practice, saying, "Just read the fucking license agreement."

Precious's picture

Returning from a meeting with attorneys in London, Rupert Murdoch commented, "Why didn't I think of that."

espirit's picture

You mean that when I would place a buy with my online broker, and they short the same stawk 10 to 1 against me, it's ok?

Pick clean the sheeple, but don't tread on the bosses profits.

Kinda dumb if you ask me.

Muppet Pimp's picture

Bloomberg is just doing what all monopolies do given ample time, they are abusing their priveleged position due to their greed.  One would think that say a silicon valley tech outfit could put together a product that would match (exceed even) the bbg terminal capabilities at half the price.  Busting that monopoly must be a tough nut to crack.

Disrupt bitchez...

Precious's picture

At the request of the SEC, today Mr. Obama signed an executive order ensuring brokerage privacy rights for everyone but the Tea Party, Conservatives and Patriots.

Real Estate Geek's picture

Color me not surprised.  A fish rots from the head down.

Cheesy Bastard's picture

Whew.  I hope I never misspell Niger,  forget to put the new in front of Guinea, or the span after spic.

pods's picture

You must also only use "hit the slopes" during winter.


Cheesy Bastard's picture

Be careful pods.  "Hit the slopes" might be good for Poles, but would be very offensive to Asians.  Let me have a nip and I'll think about it.

Dewey Cheatum Howe's picture

And don't call fat chinese people chunks or gay jews heblews either.....

dizzyfingers's picture

"...will be issuing an official press release shortly."

Yeah right. All, hold your breath...

Burt Gummer's picture

How much does a bloomberg terminal go for these days? 10,000? 20,000?

It better come with some inside info at that price.



James's picture

I read the other day that those terminals go for 20k per year.

pods's picture

I got mine for free.

I found the "bill to Kevin Henry" button.


stopcpdotcom's picture

Pray for the prey.

Deo vindice's picture

Or maybe they just prey on those who pray. (Wouldn't that - generally speaking - be conservatives?)

knukles's picture

Ah hah!  Just as I suspected.  the Bloomberg-IRS anti Papist Movement is alive and well when all this time I've been called a tin foil mitre conspirator

resurger's picture

I want to add me self to the jews circle to get first hand information about futures QEasy and shit.

francis_sawyer's picture

I think you have to be careful in jumping to conclusions here...


For example, on something like this...


Now that I've given the matter some thought, I let it sink in a bit... I'm thinking that the 'trades' in that situation ran themselves & executed out of thin air... It's not logical to conclude that there were any PEOPLE involved in that...

knukles's picture

Yes, it was all due to the error in the one line of code of the program of mass financial destruction that had been stolen from Goldman and tracked down by the Feebies within hours due to its destructive nature in the hands of the wrong individual.

francis_sawyer's picture

Round up the usual suspects... [oh wait, but not him... or no, not that one... that one there can go free too...]... OK, I think we have our suspects...

I am Jobe's picture

Need a 2 hr Odumber speech with Bloomturd to keep the crap safe.


Ban KKiller's picture

Watched watchers are being watched. Ha fucking ha. All your information is reviewed for loyalty to your master...MONEY. (fiat)

slightlyskeptical's picture

So basically Bloomberg has been front running the markets for decades using the info from client terminals. If so anything less than full forfeiture of all Bloomberg assets is a miscarriage of justice.

Urban Redneck's picture

R.I.C.O.   - why wait for a trial, when Bloomturd's crown jewel can be subjected to the same injustice he subjects his subjects to?

ThisIsBob's picture

Is it wholly unereasonable to suspect that Bloomberg "journalists" were not the only ones with access to this information?

Rustysilver's picture

If you can't trust the Bloomberg terminal, who can you trust.

CaptainSpaulding's picture

I didnt know they named a bus terminal after Mayor Bloomberg

firstdivision's picture

How about they investigate the "Chinese Wall" at GS et al?

IamtheREALmario's picture

Yes, and Goldman's analysts NEVER talk to the internal hedge fund, they call an investment bank. Pot calling the kettle black and the whole Wall Street mess stinks, including the captive media.

ThisIsBob's picture

That terminal likely belonged to the old geezer with the green eyeshades who has a cubicle in the basement of the Treasury building, and who is in charge of the SnP.

I'd be looking for a correction right in here.

bugs_'s picture

very murdochesque

Joseph Jones's picture

If you can't trust a jew named bloomberg, who can you trust? 

lunaticfringe's picture

I find Bloomberg to be an offensive, elite snob, who polices everyone else's conduct while ignoring his own.

Odd, that I can't stomach the prick but never considered his ancestry. There is always one Nazi that will point that out.

francis_sawyer's picture

He only started becoming an offensive, elite snob, who polices everyone else's conduct AFTER the candle lit "conversion" ceremony whereby Douglas C. Neidermeyer whacked his diapered ass with a cricket bat... That cricket bat has special properties...

Smegley Wanxalot's picture

The fed and treasury are just checking with bloomturd to try to see if they can improve their surveillance techniques. May be opportunities for surveillance economies of scale.

WTF2's picture

 Murdock is pissed he did not thnk of that...  Got to hand it to Mike..

W T F II's picture


Sorry, dude (or dudette..?) I inadvertantly took your handle. No harm meant, as I was unaware it pre-existed. Can we coexist..? I am OK, but defer to your pecedence..!!