Traders may have got Fed announcement milliseconds early

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Traders may have got Fed announcement milliseconds early

#1  Postby GT2211 » Sep 25, 2013 4:51 am

Reporting from CNBC and Quartz points to strong circumstantial evidence that one or more traders received an early leak of the Federal Reserve's surprise decision last week not to slow down its bond purchases.

Markets swung rapidly on the 2 p.m. announcement last Wednesday, with stocks, bonds, and the price of gold all skyrocketing. Somebody placed massive orders for gold futures contracts betting on exactly that outcome within a millisecond or two of 2 p.m. that day -- before the seven milliseconds had passed that would allow the transmission of the information from the Fed's "lock-up" of media organizations who get an early look at the data and the arrival of that information at Chicago's futures markets (that's the time it takes the data to travel at the speed of light. A millisecond is a thousandth of a second). CNBC's Eamon Javers, citing market analysis firm Nanex, estimates that $600 million in assets could have changed hands in that fleeting moment.

There would seem to be three possibilities: 1) Some trader was extraordinarily lucky, placing a massive bet just before a major announcement that would make that bet highly profitable. 2) There was a leak, either by a media organization with early access to the data or even someone at the Fed. Or 3) The laws of physics have been violated as the information traveled from Washington to Chicago faster than the speed of light.

http://www.washingtonpost.com/blogs/won ... nds-early/
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