Financial markets beat to the rhythm of economic reports, so the possibility the U.S. will shake up how that data is released has Wall Street pondering the consequences.
Right now, journalists, including those from Bloomberg News, get advance copies of market-moving reports from the federal government without the ability to disseminate them until an agreed-upon time.
Donald Trump’s administration may stop this practice at the Department of Labor, which releases figures such as monthly employment numbers, according to people familiar with the matter. While the reason for the potential shift wasn’t immediately clear, the previous administration argued that the setup was risky from a security standpoint and cited high costs for providing security and staff.
There may be unintended consequences. If the government data is only available on its website at the time of release, it could make these reports more of a winner-takes-all situation. That’s because websites are built atop a first-in, first-out communications protocol. Whoever pings a site fastest gets the information first -- meaning a single trading firm may get the market-moving info before anyone else, virtually ensuring a winning trade.
Lockups
Under the current setup, Bloomberg News, Reuters and other accredited media organizations participate in a lockup process. They are allowed into a room, cut off from communication with the outside world and handed key economic data. But at the appointed time, a switch is flipped and those journalists can pump out the results to their readers and paying subscribers at once -- forming arguably a more level playing field.
“Anything that affects the information flow is never well received by the market,” Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management, said on Bloomberg Television Tuesday. This will “create more volatility going forward.”
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 distributed to the public. Statistics agencies and central banks in the U.K. and Canada use similar procedures.
“The details of economic data releases matter,” said Bipan Rai, North America head of foreign-exchange strategy at CIBC. “The longer it takes to suss out the details post-release, the higher the chances that markets will whip around.”
There is precedent. The U.S. Department of Agriculture decided in 2018 to stop giving journalists key crop reports early. That information now hits the government’s site first. The agency said posting the information online was cheaper and less risky.