What’s not to love about this market? LIBOR bid rigging, missing funds at major commodities brokers and now we hear about leaks in government economic data releases. The Department of Labor just published a report which was produced in August 2011 by Sandia National Labs about possible leaks of government economic data. The report titled “Red Team Report CleanSweep: Technical Details” found some disturbing facts about how government was allowing the information to be released.
Normally, the press is allowed into a press lockup room and receives the economic information 30 minutes before its official release. The report states:
“Once allowed in, these press personnel dispersed to their various work areas. Sign in and surrender of cell phones occurred after they had been allowed entry, with some individuals needing to be reminded by OPA personnel to sign in and turn in cell phones.”
However, the Red Team found something in the press lockup room that they were not expecting to see:
“Members of the SNL Red Team were somewhat surprised to find what appeared to be network appliances (e.g. switches and routers) capable of supporting infrastructure well beyond the workstations to which they were connected.”
So what exactly does this press lockup room look like:
“The Black Box devices currently employed to control the release of embargoed data in the press lockup facility are simple and fairly robust. However, the current concept of operations governing their use makes compromising or circumventing this control mechanism a plausible occurrence. The cluttered nature of the facility, plethora of non‐DOL equipment, and multiple instances of Black Boxes for some press organizations, creates opportunities to mask activities designed to neutralize these control devices.”
Essentially, the press embargo room is such a mess that some “news organizations” were hiding computer equipment that was being used to speed the dissemination of the economic data to their subscribers. The below picture is the ACTUAL workstation from the press embargo room. The two black boxes next to that circa 1976 phone are the devices in question:
When the Red Team wanted to know what the equipment was being used for, they got this response from government staffers:
“As explained by OPA and BLS staff, the elaborate networking configurations are meant to give their owners an advantage over neighboring competitors in transmitting data when it is authorized for release.”
The Red Team concluded that the sophisticated equipment was being used by high frequency traders:
“The apparent root cause for the issues driving this assessment is the presence of algorithmic traders in the press lockup facility… Likely adversaries in this scenario are profit‐driven, technically sophisticated individuals who may have considerable resources at their disposal. Their technical proficiency enables implementation of stealthy surveillance equipment. Though they are willing to bend and potentially violate rules and laws, there are limits to what these adversaries are willing to do to achieve their goals‐ violence is unlikely as an operational method.”
Well at least the high speed trading bots are not violent.
Since the release of this report, the BLS has kicked a few “news organizations” out of the press lockup report. According to the AP:
“The department in May revoked access for a handful of companies that deliver data to high-speed traders but produce little or no original news content. Among them is Need to Know News, part of Deutsche Boerse Group, which produces no original news content.”
How are investors supposed to have confidence in a market that seems rigged and conflicted at every juncture? A “news organization” that is owned by a global stock exchange was just caught illegally sending out information to their high paying clients. Once again, it’s the same story. Exchanges and other conflicted market participants will do whatever it takes to please their highest paying clients even if that means bending or in this case, breaking the rules.