Market Abuse and Insider Trading: heads up FCA

by George Hatjoullis

There has been much made of tougher regulation of financial markets. Yet this morning (13/10/2015) I saw something that was a not an uncommon occurrence during my years in the financial markets. The chart below is a minute chart of the GBPUSD rate. It began to decline at 9 am this morning. By 9.30 am there had been a substantial move. At 9.30 am the CPI data were released and surprised everyone by dropping into negative territory. But did it surprise everyone? How was it that GBPUSD came to move so much before the information became public? One might suspect that someone had prior information and acted on this information. But how can this be? Surely the Office of National Statistics can be trusted? Indeed, the ONS is trustworthy. However, there is a practice of releasing information to journalists, and the like, prior to the public release so that they can have copy ready to publish at release. Publication is embargoed until the release time but there are thus many potential sources of information prior to the release time. I think the FCA needs to take a close look at this event and any like it. The habit of releasing market sensitive information to a limited group prior to publication is problematic, even if embargoed.


There are other plausible explanations for this event, and others like it. It could have been a coincidence. It is nevertheless an interesting phenomenon and one worthy of some consideration by the FCA. As I write (17:19) GBPUSD is at 1.5245 and rising. This is very close to the level to which it had fallen just before the CPI was released to the public. One could argue that the market significance of the CPI ‘surprise’ was fully discounted before the public release. Now why should this have happened?