Fed investigating whether news media leaked QE news early

Eamon Javers of CNBC reports that the Federal Reserve Board is talking to business news organizations to determine whether one of them leaked the Fed’s decision last week to continue quantitative easing before the embargo was lifted as $600 million was traded in Chicago on the news milliseconds before it was officially released.

Javers writes, “Here’s the chronology of what happened on Wednesday. In advance of the release of the market moving decision, Federal Reserve officials followed a standard procedure to choreograph a tightly planned embargo operation that gave reporters advance copies of the Fed’s decision. Inside a secure so-called ‘lockup’ room on the top floor of the William McChesney Martin Jr. building, Fed officials instructed reporters not to send information about that decision to the outside world before precisely 2 p.m. EDT as measured by the national atomic clock in Colorado.

“The doors were locked at 1:45 p.m., and Fed staffers handed out copies of the statement at 1:50 p.m., allowing reporters a few minutes to digest the complicated document before reporting on its contents. At 1:58 p.m. television reporters were escorted out of the room to a balcony where cameras had been positioned. The Fed’s security rules dictated that television reporters were not allowed to speak before precisely 2 p.m. Print reporters were told they were allowed to open a phone line to their editors at headquarters offices a few moments in advance of the hour, but not allowed to interact with people on the other end of the line until exactly 2 p.m.

“On top of those precautions, every media person entering the lockup — including two employees of CNBC — was required to sign an agreement that read: ‘I understand that I may make no public use of the documents distributed by Federal Reserve Board (FRB) staff or the information contained therein, including broadcasting, posting on the Internet or other dissemination, until the time the FRB has set for their public release.’

“All of the security precautions were taken to prevent the details of the Fed’s decision from leaving the building before the precise deadline to make sure that editors, technicians, producers and even computer techs in media offices all over the country could not learn of the decision ahead of time.

“On Wednesday, that tiny sliver of time saw a burst of trading. Nanex said as much as $600 million of assets changed hands in Chicago in the milliseconds before the rest of the market there was aware of the decision by the Fed.”

Read more here.