U.S. Agencies Tighten Security around Economic Data Releases

By John H Cushman JR. | International Herald Tribune, July 18, 2012 | Go to article overview

U.S. Agencies Tighten Security around Economic Data Releases


John H Cushman JR., International Herald Tribune


Government efforts to control the release of economic data stem from the newfound importance of high-speed trading, where getting data a fraction of a second before rivals can mean big profits.

Market-sensitive economic data released by the U.S. government are guarded with launch-code secrecy, a precaution against anyone who might try to take advantage of an accidental or surreptitious leak to gain an insider's edge in the financial markets, turning milliseconds into millions.

Yet for all the rituals of high security, government officials have become increasingly nervous that the process is vulnerable and are now overhauling it.

After a yearlong review that included scrutiny by anti-hacking specialists from Sandia National Laboratories, officials at the U.S. Labor Department revoked the credentials of a few little-known news organizations that appeared to serve financial clients rather than the public at large.

The government has also ordered other media groups to replace the computers they use at the sites where the government data are released with new ones under tighter controls.

The efforts stem from the newfound importance of high-speed trading, which began to grow significantly in the middle of the last decade and is now a central part of some hedge funds' investment strategies. By gaining information seconds or minutes before others, high-speed traders -- sometimes known as high-frequency or algorithmic traders -- can use the computerized nature of modern finance to make quick profits or, if a bet goes wrong, take large losses.

Under the current setup, journalists are locked in a media room at the office of the government agency releasing the data, and after a countdown, computers are turned on simultaneously by an official who flips a switch and allows the computers to disseminate monthly data, like the consumer price index, to the public.

In addition to the inflation numbers, the lockup process, in use at several agencies, covers releases on economic growth, home sales, gasoline prices, corn yields and the unemployment rate, among other things.

The Labor Department's overhaul was ignited by inquiries starting in 2007 from the F.B.I., the Securities and Exchange Commission and the department's own inspector general. Officials did not cite any specific major breach of security, but they had grown concerned that one was possible. Two instances in 2008, when Reuters accidentally released data a few seconds too early, heightened concerns.

The clampdown has strained the Labor Department's relations with some of the world's biggest news agencies, including Reuters and Bloomberg News. In negotiations with the department and at a fractious congressional hearing, the companies suggested the government was taking extreme measures against an imagined threat.

At the center of the Labor Department's effort was a so-called Red Team from the Sandia labs, a government-financed research group operated by a subsidiary of Lockheed Martin, which has half a century of experience in computer security, including work on the military's command and control networks.

The "root cause" for the review, the team noted, was the possibility that traders or their agents could be working inside the lockup.

Acting on the team's recommendations, Labor Department officials sought a wholesale replacement of the computer equipment in the lockup room. …

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