Friday, May 08, 2009

The big story today

Lots going on today, but this news is potentially significant: "Statscan looking into jobs leak rumours," "StatsCan probes speculation jobs data leaked early." The news, in a nutshell, is that it's possible that there was a leak of today's Statistics Canada job numbers which led to suspicious market speculation in advance of the public release:

Statistics Canada launched an internal review of its security measures following speculation that a stronger-than-expected jobs report was disclosed before the scheduled time.

"I can assure you that we are taking this seriously," Geoff Bowlby, director of labor statistics at Statistics Canada, said in a telephone interview Friday. "We're checking to make sure that everything took place."

The Canadian dollar surged this morning, appreciating as much as 0.7% during the 6 a.m. to 7 a.m. "lockup" in Ottawa, the hour during which Statistics Canada provides the figures to reporters under the condition they not be disseminated.

From the Globe:
A Wall Street banker with access to trading data said a “large” London-based hedge fund made an aggressive purchase of Canadian dollars about 45 minutes before the Statscan release.

This banker, who declined to name the hedge fund and spoke on condition that he wouldn't be named, said it's difficult to say there was a leak. Because it was still early in New York and Toronto, trading of the Canadian dollar was thin and it wouldn't take much to trigger a change in the currency's value, the banker said.

“The move earlier today is the first time I said to myself, maybe there's a hole [where information is leaking], but who knows?” said David Watt, a currency strategist at RBC Dominion Securities in Toronto.

There have been suspicions for months, but “this is the first time that it looks like someone actually made money on the trade,” Mr. Watt said. “So you have to wonder if there is a leak.”
More reaction:
"To me, it raises all kinds of red flags," Doug Porter, an economist with BMO Capital Markets in Toronto, said in an interview. "We saw a very distinct move in the currency from about 6:15 a.m. and 6:45 a.m. and it certainly looks unusual, to say the least."

Speculation about a leaked jobs number is "all over London," said Steve Butler, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Canada's third-largest bank.

To be sure, Mr. Porter said the move could have been created by a trader betting heavily on the employment figures, leading others to believe the numbers had been leaked.
Where a StatsCan review might be looking:
Between 20 and 30 employees at Statscan may be privy to the numbers, but those people are under orders not to discuss the information by phone or e-mail, Mr. Bowlby said.

Paper records are stored in a high-security cabinet approved by the Royal Canadian Mounted Police. Excess paper is shredded.

“The labour survey is heavily guarded,” Mr. Bowlby said.

At 2 p.m. ET the day before the employment survey is released, Statscan provides the report to officials at the Privy Council Office, the Finance Department and Human Resources and Development Canada.

Those officials are instructed to refrain from sharing the data with their ministers before 5 p.m. ET, Mr. Bowlby said.
Given the possibility of a significant leak of financial data having occurred, this needs to be investigated thoroughly, I'm sure Mr. Flaherty would agree.