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A faster-than-light message could mean financial reporters are breaking the law

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Federal Reserve
Federal Reserve

Last week's Federal Reserve announcement made big waves on Wall Street, sending markets skyrocketing and financial organizations scrambling to spread the news — but a new report raises concerns that some were spreading it faster than they should have. The high-speed trading experts at Nanex say they saw simultaneous reactions in both Washington D.C. and Chicago, when the news should have taken at least three milliseconds to travel the 600 miles from the Federal Reserve Building to the Chicago's commodities exchanges.

Spreading information at light speed

Because Federal Reserve announcements have such an impact on markets, access to the news is kept under strict embargo, with reporters confined to a "lockup room" in the Federal Reserve headquarters in Washington. They can prepare stories for posting within the room or open phone connections with colleagues outside, but they're strictly forbidden from transmitting information outside of the room until the 2pm embargo lifts. For high-speed financial wire services, that often means uploading data into an automated system, from which it can travel to other terminals through dedicated fiberoptic cables, spreading information at light speed.

But Nanex founder Eric Hunsader says in this case, the information traveled faster than light, appearing at exactly 2:00pm at both exchanges, which suggests someone smuggled the information out of the lockup room. If it's true, it would be a lucrative way to break the rules. But while there are plenty of suspicions, there are no clear suspects so far, and the blinding speed of financial markets leaves few clues as to who might be behind the discrepancy.