Mother Jones: Somebody Stole 7 Milliseconds From the Federal Reserve

[JohnyCanuck]

Last Wednesday, the Fed announced that it would not be tapering its bond buying program. This news was released at precisely 2 p.m. in Washington "as measured by the national atomic clock." It takes seven milliseconds for this information to get to Chicago. However, several huge orders that were based on the Fed's decision were placed on Chicago exchanges two to three milliseconds after 2 p.m. How did this happen?

CNBC has the story here, and the answer is: We don't know. Reporters get the Fed release early, but they get it in a secure room and aren't permitted to communicate with the outside world until precisely 2 p.m. Still, maybe someone figured out a way to game the embargo. It would certainly be worth a ton of money. Investigations are ongoing, but Neil Irwin has this to say:

In the meantime, there's another useful lesson out of the whole episode. It is the reality of how much trading activity, particularly of the ultra-high-frequency variety is really a dead weight loss for society.

…There is a role in [capital] markets for traders whose work is more speculative…But when taken to its logical extremes, such as computers exploiting five millisecond advantages in the transfer of market-moving information, it's much less clear that society gains anything…In the high-frequency trading business, billions of dollars are spent on high-speed lines, programming talent, and advanced computers by funds looking to capitalize on the smallest and most fleeting of mispricings. Those are computing resources and insanely intelligent people who could instead be put to work making the Internet run faster for everyone, or figuring out how to distribute electricity more efficiently, or really anything other than trying to figure out how to trade gold futures on the latest Fed announcement faster than the speed of light.

http://www.motherjones.com/kevin-drum/2013/09/somebody-stole-7-milliseconds-federal-reserve

[The Magistrate]

1. This Kind Of Thing, Sir, Is Actively Destructive

A transaction tax, pitched to the amount of time an asset is held, the shorter the hold the higher the rate, could stop it in its tracks.

[TroglodyteScholar]

4. That would definitely work!

I wish we lived in a world where such a thing was even a remote possibility

[Junkdrawer]

6. A new third party is growing around that idea....

http://www.taxwallstreetparty.org/

Claims to be the heir of OWS.....

[DJ13]

2. Theres only one anwer to this kind of problem

Either trading on immediate news releases can only be done by human actions (no supercomputers), or a temporary market wide halt for all trading for a few minutes to prevent gaming the system.

[PoliticAverse]

3. Apparently they were allowed to text while in the 'secure room'...

See: http://www.zerohedge.com/news/2013-09-24/tip-box-fed-made-it-possible-many-people-leak-it

[enlightenment]

5. So, no secret then.

That was stupid of them.