The Financial Conduct Authority on Thursday launched a formal probe into allegations that some traders were able to hear potentially price-sensitive Bank of England press conferences before the official broadcast.
The Bank admitted a back-up audio feed from the briefings had been “misused” by the third-party supplier providing it.
The affair marks an embarrassing end to the rein of Governor Mark Carney, whose successor is expected to be announced imminently. He leaves next month.
The unnamed supplier had been supplying the audio to clients, potentially giving them an edge on the rest of the market because audio-only broadcasts are faster to air than video and audio.
The added speed, known as lower latency, could allow high-frequency traders unfairly to trade on breaking news.
The Bank was only made aware of the breach when The Times newspaper told it. The supplier was cut off immediately. The audio feed was only set up to be used in the event that the TV line, provided as a pool to broadcasters by Bloomberg TV, went down. The press conferences concerned are those in which the Bank of England governor and senior colleagues discuss their quarterly monetary policy and six-monthly financial stability reports.
The FCA probe is being handled by the watchdog’s market abuse investigations team under the auspices of Mark Steward, director of enforcement and market oversight.
One market operator told the Standard high-frequency traders were scrupulous about staying within the rules but would jump at any chance legally to gain an edge on the market.
The Bank said in a statement: “The Bank operates the highest standards of information security.”
