by Global Intel Hub (JoeGelet), 2016

http://www.zerohedge.com/news/2016-05-03/ecb-study-says-us-data-leaked-key-traders

Apparently, Europeans need to do ‘studies’ to show that markets are rigged.  See the study here.  In Summary:

We examine stock index and Treasury futures markets around releases of U.S.
macroeconomic announcements. Seven out of 21 market-moving announcements
show evidence of substantial informed trading before the official release time. Prices
begin to move in the “correct” direction about 30 minutes before the release time.
The pre-announcement price drift accounts on average for about half of the total
price adjustment. These results imply that some traders have private information
about macroeconomic fundamentals. The evidence suggests that the preannouncement
drift likely comes from a combination of information leakage and
superior forecasting based on proprietary data collection and reprocessing of public
information. 

Readers of Splitting Pennies understand Forex and how central banks control Forex markets, which is a superset of all other markets.  So it’s interesting that a working group at the ECB studies stock & treasury futures markets, to show ‘insider trading’ based on ‘price drift’ – are they setting themselves up for the ultimate proof for manipulating the Euro surrounding key ECB data releases?

Although their conclusion is probably correct, their methodology is ridiculous.  Their proof that there’s insider trading going on is based on ‘price drift’ which accounts for about 50% of the post-data move.

The European Central Bank published a working paper — which means it hasn’t been peer reviewed as yet — arguing that seven out of 21 market-moving announcements show evidence of “substantial informed trading” before the official release time.The paper identified seven indicators that they said showed “strong” evidence of pre-announcement drift: The Conference Board’s consumer confidence index; the National Association of Realtors’ existing-home sales report and pending-home sales report; the Commerce Department’s preliminary GDP report; the Federal Reserve’s industrial production report; and the Institute for Supply Management’s manufacturing and nonmanufacturing index.

The accused, has a more reasonable answer for ‘price drift’ – it’s because the market expects the numbers to be as expected:

A spokesman for the National Association of Realtors says they take any allegations seriously. He points out that the existing-home-sales report is released from a secure location, that reporters are instructed not to communicate outside of the room, and that the organization monitors the media to make sure data is not disseminated early. He’s said on occasion media organizations have accidentally released data early, apologized to the group and not done so subsequently.  The spokesman also suggested, however, that traders may be making educated guesses. The pending-home-sales release tracks closely what the existing-home-sales report eventually shows.  A Federal Reserve spokesman declined to comment. Messages left with the Commerce Department’s Bureau of Economic Analysis and The Conference Board weren’t returned.

Maybe these Eurodemics didn’t know that Reuters sells data front running as a service, it’s now called “Low Latency News” – See the brochure here.

Thomson Reuters Machine Readable News

BE FIRST WITH LIGHTNING FAST DELIVERY FROM THE LOCK-UP TO
YOUR ALGORITHM

When it comes to programmatic trading and market making there can’t be any compromise
on speed. Thomson Reuters offers the industry’s leading, ultra-low latency source
of structured economic indicators optimized for applications. For traders sensitive to
microseconds, our service is optimized from publication to delivery for peak performance.
Our feed is available in London, New York, Chicago and Washington DC, allowing you to
co-locate your applications near major liquidity hubs.

PROFIT FROM ECONOMIC RELEASES ANYWHERE IN THE WORLD

Our journalists have been winning on economic releases for decades. Whether it is a lock-in
or embargoed release, automated extraction from a website or a “live alert” release, we
have put in place the best people, processes and technology to accurately get the number
from anywhere in the world to your algorithm.

DON’T MISS OUT ON THE MOST IMPORTANT INDICATORS OF FUTURE
ECONOMIC ACTIVITY

Because every millisecond counts Thomson Reuters captures critical indicators of future
economic activity as direct embargo releases. Our service includes Purchasing Managers
Index (PMI) and the Institute for Supply Management (ISM) Business Reports as well as
exclusive access to the Ipsos Primary Consumer Sentiment Index. 

…

The breadth and depth of our reference, real-time and historical market data is second to none. Examples of our information include: reference data covering all the major markets and instrument types with over 5.1 million live records; 450 markets and seven million active quote records split across asset class; 162 spot prices, and cross rates for over 1500 currency pairs, over 90 forward prices for currencies vs. the US dollar; and time series content snapped post market close with 70 million price points snapped on a daily basis. 

The post ECB Study says US data ‘leaked’ to key traders appeared first on Forex IQ.