The Fed Robbery Revisited Riadh Zaatour and Stéphane Tyč
December 04, 2013
We revisit the controversial release of FOMC news on September 18th 2013 using the time stamps generated by the exchanges and included in their raw feed. Our analysis is consistent with a simultaneous release of the information at the CME and at the Nasdaq colocation centres exactly at 2:00:00 pm.
A heated debate followed the FOMC “no taper” information release of September 18th. This controversy was started in a paper by Nanex, a market data research company. In a study called “Einstein and The Great Fed Robbery” 1 Nanex asserts that markets in Chicago and New York reacted almost simultaneously to the Fed announcement. This is incompatible with the time needed to move information from Washington DC to either city at the speed of light. Nanex concluded that There are 2 possibilities, and both aren’t good news for Wall Street., alleging foul play. The analysis of Nanex was then criticised by Virtu Financial who pointed out inaccuracies in their method 2. The FIA PTG 3 issued a statement saying that the rules governing the release of news were, presumably, not violated 4. The FIA PTG further states that the method of releasing the information by the Federal Reserve had been changed from lock up to embargo in March of 2013 and that the simultaneous release of the Fed announcement at 2:00 pm ET sharp in Chicago and New York was to be expected.
We revisit this debate with our own data sources. We begin by presenting the data and especially the timestamps involved in the study, then we identify market activity right after 2:00 pm on September 18th. We then try to determine the release mode for the FOMC announcement of October 30, for which some changes in the release mechanism were reportedly made by the Fed 5. We also open the discussion on the different methods of releasing news.
For the complete paper, please click here.