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"Robust Evidence" Confirms Fed Leaks Data Ahead Of Rate Announcements

Tyler Durden's picture




 

Having questioned whether Tim Geithner leaked every Fed announcement to the banks during his tenure (but did not mention it in his memoirs) and shown that traders acted on information at faster than the speed of light (and thus were indeed aware of leaked decisions ahead of time), it should be no surprise that a new research paper has found “robust evidence” that some traders have been getting early news of U.S. Federal Reserve rate announcements and then trading on it during the Fed’s media lockup. The trading anomalies that Bernile and his colleagues spotted begin about 15 minutes before the news embargo is lifted and continue at a fairly even pace and are "statistically significant and in the direction of the subsequent policy surprise."

 

As Bloomberg reports,

A research paper has found “robust evidence” that some traders have been getting early news of U.S. Federal Reserve rate announcements and then trading on it during the Fed’s media lockup.

 

The paper detects abnormally large price movements and imbalances in buy and sell orders that are “statistically significant and in the direction of the subsequent policy surprise.” The moves occurred during the window between when Fed announcements are supplied to the news media and when they are permitted to be released to the public, the authors write.

 

“Back-of-the-envelope calculations indicate that the aggregate dollar profits … range between $14 [million] and $256 million across the four markets that we examine” between 1997 and 2013, the authors write.

And - just as Nanex had proved previously...

“What is really interesting about our work is that it shows the problem is not a problem of milliseconds,” Bernile.

In other words, this was not just HFT front-running but actual 'information' leakage... from whom we wonder?

As we noted before...

From the August 16, 2007 transcript (page 13 of 37) of the conference call preceding this announcement.

 
 

MR. LACKER. If I could just follow up on that, Mr. Chairman.

 

CHAIRMAN BERNANKE. Yes, go ahead.

 

MR. LACKER. Vice Chairman Geithner, did you say that [the banks] are unaware of what we’re considering or what we might be doing with the discount rate?

 

VICE CHAIRMAN GEITHNER. Yes.

 

MR. LACKER. Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.

 

CHAIRMAN BERNANKE. Okay. Thank you. Go ahead, Vice Chairman Geithner.

 

VICE CHAIRMAN GEITHNER. Well, I cannot speak for Ken Lewis, but I think they have sought to see whether they could understand a little more clearly the scope of their rights and our current policy with respect to the window. The only thing I’ve done is to try to help them understand—and I’m sure that’s been true across the System—what the scope of that is because these people generally don’t use the window and they don’t really understand in some sense what it’s about.

At least we now know who the bankers' mole on the FOMC was before, as gratitude for his services, he was promoted to Treasury Secretary of the US. Because if he leaked one, he leaked them all.

 

It appears the FOMC announcements were the focus of the leaks...

The researchers found no evidence of trading abnormalities during media lockups ahead of the Bureau of Labor Statistics’ release of the monthly employment and inflation reports, or the Bureau of Economic Analysis’ release of the gross domestic product report.

So - are the markets rigged?

Full paper below:

Robust Evidence

 

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Tue, 05/13/2014 - 12:45 | 4755388 Zirpedge
Zirpedge's picture

Signapore Management University is a party school.

Blowback from flight 370?

Tue, 05/13/2014 - 12:52 | 4755418 NotApplicable
NotApplicable's picture

Wake me up when Holder issues a warrant for Geithner. Until then...

...ZZZZZZZZZZZZZZZZZZ

Tue, 05/13/2014 - 12:56 | 4755439 Buckaroo Banzai
Buckaroo Banzai's picture

Blue Horseshoe loves Anacott Steel. Apparently.

Tue, 05/13/2014 - 13:01 | 4755451 max2205
max2205's picture

Prove it. ....opps you did

Tue, 05/13/2014 - 13:29 | 4755578 Four chan
Four chan's picture

is this a leak?  the real owners of the fed, take positions, give their directive to the fed, then the fed announces the owners position of the day.

we once had a money system designed and fought for by patriots. who designed our system and what tribe owns it?

 

we must think higher and deeper, because what we have done has enslaved us, so far.

Tue, 05/13/2014 - 15:27 | 4756062 SoilMyselfRotten
SoilMyselfRotten's picture

They just may be making intelligent, well-thought out directional bets based on their years of market experience and due diligence. Hahahahahahahhaha, my bad, just had to say it out loud to see what it sounded like.

Tue, 05/13/2014 - 13:06 | 4755464 NoDebt
NoDebt's picture

Looking at the "lockup" period will never get you to where the big fix happens.  Those who get the announcement 2-3 days (or longer) in advance, have time to analyze and lean into the market well before announcement day.  

Doesn't anyone else remember the leaking of Government economic statistics (BLS?  BEA?  I forget the agency) to various connected politicians and external private parties DAYS in advance of their formal release?  It was covered on ZH less than a year ago, if memory serves.  It was justified on the grounds that those parties could "harmonize their message" with the forthcoming announcement.  And, of course, NOBODY ever traded on that information.  Surely not.

Wake up, stop looking at the miliseconds and start looking where the big boys play the game.

Tue, 05/13/2014 - 13:54 | 4755702 Barry McBear
Barry McBear's picture

I remember the US downgrade in 2011 saw the sell off start the afternoon before.  

 

 

Tue, 05/13/2014 - 13:40 | 4755635 MeelionDollerBogus
MeelionDollerBogus's picture

At this point it's blue-chip, blue horseshoe, blue apple, blue ballz & blue birdie all having a gangbang train on Anacott Steel.

Tue, 05/13/2014 - 13:00 | 4755446 Dr. Engali
Dr. Engali's picture

Wake me up when there is a warrant out for Holder.

Tue, 05/13/2014 - 13:07 | 4755479 Ignatius
Ignatius's picture

Whatever reservations I may have concerning Armstrong, his prediction of a turn in the Economic Confidence Model at 2015.75 seems more prescient with each passing day.

Tue, 05/13/2014 - 13:26 | 4755565 Canadian Dirtlump
Canadian Dirtlump's picture

Holder became a made man after the Oklahoma bombing. They peddled the 2 retardedly spoken bowl cut wearing tardhats aka Yellen and White and confirmed that the markets aren't rigged so we're all good.

 

Truth is, we're all in until is crashes because anyone with eyes to see knows the entire game is rigged and it ends with a war as the system crashes.

Tue, 05/13/2014 - 13:45 | 4755664 BeetleBailey
BeetleBailey's picture

It'll be Dr. Van Winkle before that happens Doc

Tue, 05/13/2014 - 13:04 | 4755463 Sudden Debt
Sudden Debt's picture

weird he? You beat up a hobo with a baseball bat and they give you a 50 dollar fine...
and they riig everything with a pricetag and they get a bonus....

Tue, 05/13/2014 - 14:46 | 4755920 JR
JR's picture

You may never need to give up your Z's, NotApplicable. Holder doesn’t do justice; Holder does race, and Holder does politics. He just doesn’t have time to deal with legitimate crime or fraud (aka Geithner). Under Holder Lois Lerner walks free; the Black Panthers get a pass for policing a polling place in Philadelphia with nightsticks in 2008; and it's business as usual for voters in 2008 to be told to “Vote for Obama” from posters plastered in many polling places.

But Holder was able to find time to send “civil rights” agents today to Nebraska’s Republican primary.

Writes Victory Girls: “Eric Holder’s Department of (in)Justice will be monitoring two counties during today’s Nebraska Republican primary—where Tea Party-backed Ben Sasse, former State Treasurer Shane Osborn, and Omaha banker Sid Dinsdale are locked in a three-way race—looking for any hint of civil rights violations. Representatives from the DOJ will be snooping around, looking for voter suppression or voter intimidation, you know, just like it did when No One Was Prosecuted in Pennsylvania following the election of Barack Obama in 2008.”

http://victorygirlsblog.com/eric-holders-doj-to-monitor-nebraska-republican-primary-tuesday/

Tue, 05/13/2014 - 14:53 | 4755952 LawsofPhysics
LawsofPhysics's picture

Fascism/cronyism/oligarchy, call it what it is already.  Prepare.

Tue, 05/13/2014 - 12:45 | 4755389 TeamDepends
TeamDepends's picture

The Fed is leaking?!?  Stick your finger in the dyke, citizen!!!!!

Tue, 05/13/2014 - 12:49 | 4755409 666
666's picture

Who cares? Nobody will be prosecuted and punished...

Tue, 05/13/2014 - 13:31 | 4755599 semperfi
semperfi's picture

I'm not touching Yellen !

Tue, 05/13/2014 - 13:32 | 4755604 rubiconsolutions
rubiconsolutions's picture

"Stick your finger in the dyke, citizen!!!!!"

Is that another Hillary Clinton joke?

Tue, 05/13/2014 - 12:46 | 4755397 Cognitive Dissonance
Cognitive Dissonance's picture

It depends on what 'is' 'rigged' is.

Tue, 05/13/2014 - 12:50 | 4755410 Theta_Burn
Theta_Burn's picture

And the consequences for this criminality will be?

Tue, 05/13/2014 - 12:54 | 4755433 Cognitive Dissonance
Cognitive Dissonance's picture

More of the same?

A slap on the wrist?

Bigger bonus pools?

Martial law?

Wait, wait, I'm close. I can feel it in my endo. Don't tell me.

Tue, 05/13/2014 - 12:54 | 4755434 Major Major Major
Major Major Major's picture

Promotion

Tue, 05/13/2014 - 13:34 | 4755615 MeelionDollerBogus
MeelionDollerBogus's picture

Punitive bonus adjustments of only +50% rather than +500% ?

Tue, 05/13/2014 - 12:46 | 4755400 slightlyskeptical
slightlyskeptical's picture

This is probably why the SEC lets everyone get away with the criminal behavior...because the Treasury is complicit as well.

Tue, 05/13/2014 - 12:47 | 4755402 pods
pods's picture

The FED works FOR the banks, why the hell wouldn't they let them in on it?

pods

Tue, 05/13/2014 - 12:49 | 4755406 bubblemania
bubblemania's picture

Bullish!

Tue, 05/13/2014 - 12:49 | 4755407 Aknownymouse
Aknownymouse's picture

AUDIT THE FED

Tue, 05/13/2014 - 13:06 | 4755476 anarcholeptic
anarcholeptic's picture

What good would that do? Everybody knows they're criminals... Thats like saying we're going to check into the criminality of the FEDs criminal activity.

Tue, 05/13/2014 - 13:06 | 4755477 anarcholeptic
anarcholeptic's picture

What good would that do? Everybody knows they're criminals... Thats like saying we're going to check into the criminality of the FEDs criminal activity.

Tue, 05/13/2014 - 12:50 | 4755414 mtndds
mtndds's picture

Fuck ya they are rigged!  Bastards.

Tue, 05/13/2014 - 13:32 | 4755606 semperfi
semperfi's picture

what isn't rigged?

Tue, 05/13/2014 - 12:50 | 4755415 101 years and c...
101 years and counting's picture

they have it backwards.  the data is leaked TO the fed by the bankers, not the other way.

Tue, 05/13/2014 - 13:01 | 4755420 JustObserving
JustObserving's picture
"Robust Evidence" Confirms Fed Leaks Data

No US academicians would dare make such conclusions - their careers would go up in flames.  Welcome to the land of the free, and rigged markets.

Worry not, brave Americans, the NSA has you covered from every angle.

Let's not forget that German investigators concluded that there was considerable insider trading before 9/11.  Of course, the 9/11 commission refused to look at insider trading in conjunction with 9/11 - it had little practical value they claimed.

German central bank president Ernst Welteke later reports that a study by his bank indicates, "There are ever clearer signs that there were activities on international financial markets that must have been carried out with the necessary expert knowledge," not only in shares of heavily affected industries such as airlines and insurance companies, but also in gold and oil. [Daily Telegraph, 9/23/2001] His researchers have found "almost irrefutable proof of insider trading

http://www.atimes.com/atimes/Global_Economy/NC21Dj05.html

Tue, 05/13/2014 - 12:52 | 4755422 Seasmoke
Seasmoke's picture

There is never just one cockroach. 

Tue, 05/13/2014 - 12:52 | 4755423 order66
order66's picture

FED, SEC, CFTC....

Captive agencies all.

Tue, 05/13/2014 - 13:00 | 4755444 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

If you can prove it was one of the FED or Treasury trading desks profiting on it. Yes without a doubt that even a caveman could understand the fact.

 

Tue, 05/13/2014 - 13:01 | 4755455 OC Sure
OC Sure's picture

 

 

"The trend has been established before the news is published, and in bull markets bear items are ignored and bull news exaggerated, and vice versa."  - Livermore

Tue, 05/13/2014 - 13:04 | 4755466 Dr. Engali
Dr. Engali's picture

I'm sure that this fine report will give our diligent regulators all the information they need to pursue and punish all the culpable parties.... as soon as they get done watching the latest episode of midget trannie porn.

Tue, 05/13/2014 - 13:52 | 4755699 Ban KKiller
Ban KKiller's picture

You give them too much credit. 

Tue, 05/13/2014 - 13:07 | 4755478 i_call_you_my_base
i_call_you_my_base's picture

The idea is to recapitalize banks through fraud.

Tue, 05/13/2014 - 13:23 | 4755550 seek
seek's picture

Which is the polite way of saying the idea is to cover up the first fraud with a second, bigger fraud.

Tue, 05/13/2014 - 13:08 | 4755482 optimator
optimator's picture

The markets are all rigged.  You know it, they know it, they know you know it, and they know there isn't a thing you can do about it.

Case Closed.

Tue, 05/13/2014 - 13:17 | 4755527 Winston of Oceania
Winston of Oceania's picture

Then why do the sell side bemoan the lack of HUMAN traders in the market? Without the day traders and 401K monies "all-in" on stawks they have no one to sheeple-shear.

Tue, 05/13/2014 - 13:26 | 4755569 seek
seek's picture

The sell side traders are just in it for the skim and they need victims.

The people behind this make up the system itself. The amounts here are too small to actually be of use to do anything meaningful within the system -- but they are sure as hell a great reward to those who cooperate with TPTB in making things happen.

Tue, 05/13/2014 - 13:11 | 4755486 syntaxterror
syntaxterror's picture

Who needed early leaks?

Everyone knew it was going to be: CTRL+ALT+PRINT, ZIRP, bailouts, handouts, with no regulatory enforcement.

Didn't take a nostradamus to figure that out. 

Tue, 05/13/2014 - 13:15 | 4755516 BeetleBailey
BeetleBailey's picture

OF COURSE the markets are rigged. What a fucked up question to ask on this forum.

Geithner? The little weasel prick needs to be locked up...and butt fucked sans lubrication from the pervs in prison.....

..for like....30 years...

Tue, 05/13/2014 - 13:27 | 4755573 youngman
youngman's picture

Just another loss of confidence in the markets....they really are doing a great job of destroying it...and when it falls..the guilty will be easy to find....they are the ones with all the money...

Tue, 05/13/2014 - 13:52 | 4755684 Ban KKiller
Ban KKiller's picture

Yes, but I am confused to the term "confidence" and anyone who has  it on Wall Street or main street fot that matter! 

I am confident that Wall Street is corrupt. 

Long suicide vests. 

Tue, 05/13/2014 - 13:42 | 4755650 the not so migh...
the not so mighty maximiza's picture

firing squads needed

Tue, 05/13/2014 - 15:05 | 4755985 ziggy59
ziggy59's picture

Gallows..rope, wood and sharp surgical steel

Tue, 05/13/2014 - 13:47 | 4755675 Ban KKiller
Ban KKiller's picture

"Leak" implies some sort of accidental breach or break. The information is PLACED! Placed where the most kickbacks will result. 

Death, by law, to banksters! 

Tue, 05/13/2014 - 13:56 | 4755710 CHX
CHX's picture

EVERYTHING is rigged these days, so this is a big yawn. The real show starts when things get unrigged and true market values are discovered (one way or another this day will come). Till then, keep smiling, it's all so obvious, such a farce it's amazing they could pull it off like that. The sheeple have been dumbed down really good, and all MSM keep on commeting on all the BS with a straight face. Compliments, really.

Tue, 05/13/2014 - 14:14 | 4755778 LawsofPhysics
LawsofPhysics's picture

Shocked, just shocked I tell you.  Come on, there is demand for .gov paper...

really there is...

Tue, 05/13/2014 - 15:04 | 4755983 ziggy59
ziggy59's picture

Memo to Corrupt SEC...the makets are rigged!

Do NOT follow this link or you will be banned from the site!