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The U.S. Labor Department said it will ban computers from the room where journalists receive advance access to major economic reports such as employment and inflation figures, in an effort to ensure a level playing field.
Currently, the department hosts “lockups” in Washington for major reports lasting 30 to 60 minutes, where journalists receive the data in a secure room, write stories on computers disconnected from the internet, and transmit them when connections are restored at the release time. Other electronic devices such as smartphones were already prohibited.
Bureau of Labor Statistics Commissioner William Beach said in a letter Thursday that Labor agencies including BLS have raised concerns about data-security stemming from the lockups, and cited a 2014 report by the department’s inspector general saying several news organizations that participate are able to profit by providing the numbers to algorithmic traders in a format that provides them an advantage.
Quicktake What’s a ‘Lockup’ and Why It Matters for Markets
Lockups will continue and journalists will be able to ask questions of statistics officials before the release time, Beach wrote. Releases will continue to be posted on Labor websites and on Twitter, and journalists can leave the room to file stories once the embargo lifts, Beach wrote.
The change will take effect March 1, Beach said.
The Commerce Department, which distributes its major reports such as gross domestic product and retail sales through the Labor Department lockups, said it will follow the new procedures.
Leaders at Commerce’s statistical agencies “are reviewing the announced changes and are committed to the secure, timely and equitable release of these important data,” according to a statement from Jeannine Aversa, spokeswoman for Commerce’s Bureau of Economic Analysis.
Labor Department officials were asked on a conference call with journalists if the change was specifically aimed at Bloomberg News, which participates in the lockups and whose founder and majority owner, Michael Bloomberg, is running for the Democratic presidential nomination. They denied any political motivation. Bloomberg along with other media outlets get revenue from selling data feeds to customers including algorithmic traders.
“In terms of access, posting on the website is about as level-playing-field as I can imagine,” Manoj Narang, chief executive officer of Mana Partners, a quantitative hedge fund. “Any time you embargo stuff, there are people who have an advantage, and the potential for abuses."
Officials said they have the capacity to handle large loads of web traffic for major data releases that previously would have been disseminated through multiple news outlets simultaneously.
“The whole world and the markets in particular operate on news and information freely coming out as quickly as possible. To the extent that information is withheld or delayed, I think that’s no good,” said Jennifer Ellison, principal at San Francisco-based BOS, a wealth-advisory firm. Even so, “it shouldn’t have a significant impact because information is priced in as soon as it can be.”
Lockups, which are permitted but not required by government regulations, have been a mainstay for U.S. media for almost four decades. They have been designed to give reporters time to digest figures on market-moving data and make sure they are accurate before being distributed to the public. Statistics agencies and central banks in the U.K. and Canada use similar lockup procedures.
The shift could cause delays in the publication of stories and data by media organizations. It could also spur an arms race among high-speed traders to get the numbers first and profit off the data, raising questions about fairness in multitrillion-dollar financial markets.
The change “is a net detriment to aggressive investors looking to profit immediately from the high-speed data feeds,” said Chris Bury, former head of U.S. rates at Jefferies, who began his career in rates trading at Merrill Lynch in 1995. “But it can also potentially benefit those investors if they formulate a view of what the data means and are able to position correctly during that longer period of higher volatility.”
In 2012, the Labor Department under the Obama administration sought to alter lockups to require journalists to use government-owned computers to write their stories. Officials at the time framed the change as addressing security risks.
After protests from Bloomberg News and other news organizations, and a congressional hearing in which editors testified, the department agreed to allow the media to continue using their own equipment and data lines.
(Updates with comment from hedge fund in ninth paragraph.)
--With assistance from Vince Golle, Alex Tanzi, Vildana Hajric, Elizabeth Stanton and Hema Parmar.
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