New evidence suggests the playing field in the global financial markets may not be level for all investors.
Some investors have been able to earn millions of dollars by making investment decisions on U.S. economic data that may have been leaked, according to a report issued Monday by the European Central Bank (ECB).
ECB researchers focused on 21 market-moving announcements between 2008 and 2014. In seven cases, there was evidence of “substantial informed trading” before the data was released. Prices began to move in the "correct" direction about “30 minutes before the release time,” the report said.
The ECB estimates traders made $20 million dollars a year since 2008 in the S&P E-mini futures market alone.
The evidence points to information leaks and proprietary data collection as the most likely sources of the pre-announcement market moves, although reprocessing public information may also contribute.
The report said information leaks cannot be conclusively established, but recommends that “strict release procedures need to be implemented for all market-moving announcements” including those from the private sector.
Included in the announcements are the gross domestic product preliminary report, existing U.S. home sales, and industrial production.
The S&P E-mini futures is one of many electronically-traded contracts that are bought and sold on the futures market.