Government Tries to Restrict Early Wall Street Access of Data Releases


New York, NY – Concerns about insider trading are not limited to hedge funds paying off corporate executives and consultants to provide material nonpublic information about public companies.  Now the federal government is looking into how best to secure the economic data it regularly releases to the public from being obtained early by Wall Street investors and traders who can then profit from this information.

The impact of the U.S. government’s monthly and quarterly data releases is clear in the large market swings that regularly take place after an important economic report is released – particularly if the results were unexpected.  Consequently, government officials have become increasingly worried that traders might get this market moving information early, enabling them to illicitly take advantage of it.

How Government Data is Released

In the past, three groups of people have legally had advance access to market moving economic data.  This includes employees at the federal agencies who produce and distribute the data, the Council of Economic Advisors who provide a prerelease of this information to the White House, and some journalists who are given early access to this information through a process known as a “lock up” so they can write and release their stories when the data is officially released.

Each federal agency is required by law to set up their own procedures for ensuring that its employees don’t accidentally or deliberately leak market moving data to the public.  These agencies are required to establish clear times and dates for the distribution of this data, develop processes and systems to protect the information, and to “physically secure” any copies of the data releases that are prepared for public release.

Bring in the Nuke Experts

In an effort to improve their security procedures, the Department of Labor requested that Sandia National Laboratories — the organization responsible for the safety of the nation’s nuclear weapons stockpile — to analyze the controls surrounding the release of the monthly employment report.  Sandia’s recommendations were presented to the DOL sometime last year, and are expected to be included in the Labor Department’s ongoing assessment of how to protect the monthly employment data.

While this request was not made as a result of an overt security failure, there have been instances when suspicious trading activity has suggested that some traders have had foreknowledge of upcoming economic releases.

For example, a few months ago, investor Jon Najarian saw what he thought was unusual trading activity in the options market ahead of the release of the January employment report.  Najarian said there was an unusual amount of calls being bought and puts being sold in the S&P 500 index before the close of the market the day before the January jobs report was released, suggesting that market participants felt the report would be stronger than expected.  The January employment report was much stronger than analysts’ expectations, causing the major stock indices to trade sharply higher after the report was released.  Najarian thought this was an instance where “someone knew the numbers before the release.”

Concerns about Energy Data

The Department of Labor is not the only agency concerned about illicit access to their regular data releases.   Officials at the U.S. Energy Information Administration (EIA) say they have recently taken steps to block certain computers from accessing the agency’s website.

The EIA has argued that the users of these computers have tried to access their website frequently, thereby slowing down the release of data to the general public while enabling them to get it as quickly as possible.  The EIA, regularly publishes potentially market moving data on the oil, coal, natural gas, and electricity markets.

Jonathan Cogan, a spokesman for the agency said, “There’s some bad actors out there who would like to slow down things for others and speed things up for themselves.  We’ve blocked certain IP addresses that appear to have malicious intentions to clog up the pipes for others.”

“Anybody using their browser and clicking refresh is already at a disadvantage,” Cogan explained.

Cat and Mouse Game

U.S. officials explain that a “cat and mouse game” has been ongoing for quite some time as Wall Street traders have tried to get access to the government data releases as quickly as possible, while the agencies have tried to make sure that this data is distributed to everyone at the same time.

However, concerns about the security of government data has become even more pronounced in recent years with the proliferation of high speed trading firms that can make huge profits by accessing important information a few seconds before the rest of the market.  The recent sentencing of an FDA chemist for insider trading has only heightened these concerns.

Consequently, we suspect that U.S. government agencies will pay increasing attention in the future to keeping the potentially market moving economic data they release to public as secure as possible.



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