Finance

Are traders using leaked data to bet on the pound? Study suggests crooked politicians could be passing secret reports on to the City

City traders may be taking bets against the pound after getting their hands on leaked Government data, an investigation has found.

The study by a US academic shows that sterling dealers frequently correctly predicted economic announcements – even when they defied expectations.

Office For National Statistics reports are shared with around 100 MPs, advisers and spin doctors as much as a day before they’re made public.

Insider information? A study by US academics shows that sterling dealers frequently correctly predicted economic announcements – even when they defied expectations

The findings suggest that secret, market-sensitive knowledge is being passed on by politicians or officials.

This could break laws against insider trading – a criminal offence punishable by up to seven years in prison.

Leading politicians last night urged the Financial Conduct Authority to investigate. Labour MP Wes Streeting, who sat on the Commons Treasury Select Committee, said: ‘This is incredibly serious and the FCA should launch an immediate investigation.

‘It’s highly suspicious that traders are able to predict such unusual movements in the market. Only a few people in Government could have access to that information.’

The study was carried out for the Wall Street Journal by Alexander Kurov, associate professor of finance at West Virginia University.

He compared movements in the pound with movements in the krona in Sweden, where economic information is kept secret from everyone – even the prime minister.

In the hour before unexpected data was published, Kurov found the krona shifted just 0.003 per cent.

But the pound moved an average of 0.065 per cent against the dollar in the right direction.

This is around half the total 0.127 per cent move the data typically caused in the two hours either side of the announcement.

During the same timeframe, the krona moved an average of 0.163 per cent, but this was almost entirely after publication.

A surprisingly strong set of figures will generally drive the pound up as traders bet on good economic performance and higher rates, while unexpected weak statistics has the opposite effect. With £2trillion in currency traded daily in London, tiny changes in the exchange rate could earn insiders millions.

Kurov, who looked at 245 releases of British data on inflation, industrial production, retail sales and employment over a six-year period, said: ‘The evidence of informed trading before UK macroeconomic news is very strong.’

Lib Dem Treasury spokesman Baroness Kramer said the FCA ‘must immediately investigate’.

Campaigners have long suspected data was being leaked.

The pre-release procedure gives politicians a chance to decide how to respond to ONS reports. It is overseen by the UK Statistics Authority, which has raised concerns of its own. The FCA declined to comment.

Comments are closed.