U.S. 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 in Washington last week.
“It’s standard practice to look at moves like this from a surveillance perspective,” Bart Chilton, a Democratic commissioner at the Commodity Futures Trading Commission, said in a statement today.
The Federal Reserve is asking news organizations to review their procedures for publishing stories based on central bank releases from so-called lock-ups, according to David Skidmore, a Fed spokesman.
Trading in gold futures and exchange-traded funds linked to gold intensified within 1 millisecond of 2 p.m. eastern time on Sept. 18, when the Fed released a statement saying it would refrain from tapering its $85 billion in monthly bond purchases, according to Nanex LLC, a firm that analyzes high-frequency trading.
The quick response is unusual because information takes seven milliseconds to travel to Chicago from Washington, where the Fed statement is released, according to Nanex. The time between Washington and New York is two milliseconds, Nanex said. 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.