WASHINGTON — Regulators are looking into how trading in financial instruments linked to gold in New York and Chicago occurred so quickly after the release of a Federal Reserve statement last week.
‘‘It’s standard practice to look at moves like this from a surveillance perspective,’’ said Bart Chilton, at the Commodity Futures Trading Commission. The Federal Reserve is asking news organizations to review their procedures for publishing stories based on central bank news releases from so-called lockups.
Trading in gold futures and exchange-traded funds linked to gold intensified within 1 millisecond of 2 p.m. Eastern time Sept. 18, when the Fed said it would refrain from tapering off its bond purchases, according to Nanex LLC, a firm that analyzes high-frequency trading.
The quick response is unusual. It takes data seven milliseconds to travel to Chicago from Washington, where the Fed statement is released. The time between Washington and New York is two milliseconds. The trading wasn’t possible unless the statement had been available in those financial centers before the 2 p.m. embargo time in Washington, Nanex said.
The Fed releases its market-moving policy statements through lockups at the press room of the Treasury Department. Journalists in the lockup are given the statement about 10 minutes early — on condition that they refrain from publication until 2 p.m., as measured by the Naval Observatory’s master clock.
The agreement does not address whether news organizations can store the information in advance on remote servers and time it for release at 2 p.m. Such servers could be in trading centers such as Chicago or New York, eliminating the time it takes for the data to travel from Washington, said Robert Stowsky, at Aite Group in Boston .
Receiving data even milliseconds early can give an unfair but highly profitable market advantages to those who get it.