May 17 (Bloomberg) -- Maine Senator Susan Collins, the top Republican on the Homeland Security and Governmental Affairs Committee, asked the Labor Department to probe what she called unusual trading activity prior to a report on employment in April.
“The sudden and negative movement in the currency and futures markets suggests the possibility that some traders may have gained unauthorized access to April’s disappointing report prior to its official release,” Collins said in a letter to Secretary of Labor Hilda Solis.
The Labor Department’s May 4 report showed that employers in the U.S. added 115,000 workers to payrolls, the fewest in six months and less than forecast by economists.
Treasury 10-year note futures contracts rose as high as 132 20/32 at 8:29 a.m. before the payrolls data was released at 8:30 a.m., after trading in a range of 132 2/32 and 132 5/32 just prior to the release. After the data came out, futures continued to rise, climbing as high as 132 22/32 before settling at 132 20/32 (see chart of 10-year T-note price action prior to unemployment number).
Michael Shore, a CME Group Inc. spokesman, said in a phone interview that the firm had no comment on whether it was looking into the incident, or whether it was contacted by U.S. policy makers.
The Chicago-based CME Group, the owner of the world’s largest futures exchange, operates a derivatives exchange that trades futures contracts and options on futures, interest rates, stock indexes, foreign exchange and, commodities.
“We are reviewing the Senator’s letter and look forward to responding,” Carl A. Fillichio, the Labor Department’s senior adviser for communications and public affairs, said in an e-mail today.
“A month before this alleged May 4 incident, the department announced a series of substantive changes aimed at further reinforcing protections to ensure the integrity of sensitive data,” Fillichio said. “We are currently working with news organizations, including Bloomberg, on how we will implement those changes. I am confident that we will all pull together to enhance the processes and procedures that protect vital economic data.”
The Department of Labor announced changes resulting from the first review of procedures in a decade at so-called lockups, where data on employment and consumer prices are released to journalists.
The agency ordered media organizations to remove computer software, hardware and communications lines they have installed at the department. Instead, reporters, including those working for Bloomberg News, will have to use government equipment, software and Internet connections.
Fillichio said at the time that he couldn’t promise that journalists will be able to transmit market-sensitive economic releases at exactly the same time under the new procedures.
He cited “violations of the embargo and the use of equipment in the lockups” as a rationale for the changes, while declining to provide specifics.
Under the current system, credentialed journalists in lockups are given data in advance of their release to the public, allowing time to prepare stories. Communication by phone or computer is cut off for the half hour that reporters are typically given to write stories. A Department of Labor employee then flips a switch that opens telephone and data lines, allowing journalists to transmit their stories using their own equipment.
Senator Roy Blunt, a Missouri Republican, last week wrote a letter to the department saying the new procedures risk disrupting financial markets.
“Given the market-moving impact of these numbers and the largely automated processes of today’s market institutions, even a minor flaw in the timing or accuracy of this data could result in a destructive impact on global markets,” Blunt wrote.
--Editors: Chris Wellisz, Gail DeGeorge