January 16, 2020 / 6:02 PM / a month ago

UPDATE 2-U.S. Labor Department to remove computers from data "lockups"

(Adds details, background)

By Lucia Mutikani

WASHINGTON, Jan 16 (Reuters) - The U.S. Labor Department’s Bureau of Labor Statistics (BLS) on Thursday announced changes to economic data “lockup” procedures, which would result in the removal of computers from its Washington newsroom effective March 1.

BLS Commissioner William Beach said the changes were in line with recommendations by the Labor Department’s Inspector General back in 2014, and was intended to keep data secure prior to public release, stay ahead of rapidly changing technology and remove the advantage of media in providing data to high-speed traders.

Media organizations, including Reuters News and Bloomberg News, send reporters to data “lockups” to prepare stories 30 to 60 minutes in advance of release, with the government controlling a communications switch to prevent an inadvertent early release.

“Developments in high-speed algorithmic trading technology now give a notable competitive advantage to market participants who have even a few microseconds head start,” Beach said in a letter to bureau chiefs.

It is, however, unclear whether removing computers from the “lockup” room would stop algo traders from accessing the data quickly. Some media organizations have complained that high-speed traders were getting the data from the government agencies’ websites through a technique called scraping ahead of the time it was released in the lockup.

There was no comment from Reuters News management.

Beach denied suggestions that the changes were aimed at Bloomberg, whose billionaire owner Michael Bloomberg is seeking the Democratic Party’s nomination to challenge President Donald Trump in November’s U.S. presidential election.

Federal agencies in the past have altered, or proposed altering, their release of potentially market-moving data in order to prevent the possibility that some investors could get earlier access, and thereby profit by selling or buying stocks, bonds or other securities using that advance knowledge.

Under the Obama administration in 2012 the Labor Department proposed changing the lockup procedures by requiring media outlets to use government-issued computers and not their own. News outlets fought the plan, ultimately successfully.

UNFAIR ADVANTAGE?

In a 2014 report, the Labor Department’s Inspector General said the current “lockups” protocol “unintentionally creates unfair competitive advantage for certain news organizations and their clients.”

The Inspector General recommended that the BLS “implement a strategy designed to eliminate any competitive advantage that news organizations present in a lockup and/or their clients may have.”

Under the new changes the Labor Department will still hold “lockups” for data, including the closely watched monthly employment report, consumer and producer inflation data, as well as the weekly jobless claims report.

Reporters will, however, only have a pen and pad to work on. This means that reporters who elect to attend the “lockups” would have to dictate their stories to their offices after the embargo on the data lifts.

Beach deferred questions regarding the data releases from the Commerce Department’s Census Bureau and Bureau for Economic Analysis (BEA) to the Commerce Department.

The Commerce Department uses the Labor Department’s newsroom, which from March will not be equipped with computers, for the Census and BEA data “lockups.” There was no immediate comment from the Commerce Department.

The U.S. Federal Reserve also uses similar data “lockup” procedures for the release of major Fed news, including interest rate decisions and the monthly industrial production report. The Fed declined to comment if it plans to make any changes to its existing arrangements.

The Labor Department will follow in the footsteps of the United States Department of Agriculture, which last year removed computers from its data “lockup” newsroom. (Reporting By Lucia Mutikani and Tim Ahmann; Additional reporting by Lindsay Dunsmuir Editing by Chizu Nomiyama and Andrea Ricci)

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