WASHINGTON Jan 2 A U.S. watchdog on Thursday
recommended the government change how it issues market-sensitive
data, specifically weekly jobless claims figures, in a move that
could end the process of releasing certain economic snapshots
through the media.
The recommendation was included in an audit released on
Thursday by the Labor Department's Office of Inspector General.
The panel was reviewing the process in an effort to prevent the
possibility of traders or anyone working inside the so-called
lockups from having an unfair competitive advantage.
Lockups are used by the government to release
market-sensitive data to the public. During a lockup, media
outlets receive embargoed copies of data reports and are
"locked" in a media room without the ability to post headlines
and stories until the embargo is lifted.
The inspector general suggested that the Labor Department
tighten lockup rules and procedures, or scrap them altogether.
In addition to the unemployment numbers, the lockup process,
in use at several news outlets, covers releases on economic
growth, home sales and inflation, among other things.
The lockups allow media outlets to sell data reports to
clients, including high-frequency, or algorithmic, trading
firms. The firms use computerized trading techniques ahead of
individual traders based on the reports.
"Algorithmic trading introduces new security variables into
a lockup system not originally designed to guard against
market-moving distributions that could be caused by the release
of government data to certain traders just seconds before the
rest of the general public," the report said.
"A few years ago, a few seconds here or there would not have
had much of an impact. Today, fractions of a second can equate
to millions or even billions of dollars in market
The report also found that the Employment and Training
Administration, which compiles the jobless claim report, had
deficiencies in its procedures governing release of the data.
The audit was mainly focused on the department's weekly
report on jobless claims, but the panel's recommendations could
have a broader impact on how other government agencies consider
cracking down on lockups.
In response to the report, the Labor Department said in a
statement: "We agree with the OIG that it is appropriate to
consider ending the (unemployment insurance) weekly claims press
The Department said it had already started exploring the
value of the press lockup and intends to continue its
consideration of how best to disseminate the report to both the
public and to news organizations.
The Labor Department said it agrees with some of the issues
the audit raised surrounding the efficacy of the lockup process.
Many government officials have already considered potential
security problems and have tightened procedures this past year
to ensure there are not any broken embargoes.
(Reporting by Margaret Chadbourn; Editing by Dan Grebler)