The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, November 25, 2011

The RBA is releasing price-sensitive information in a non-public, discriminatory way

I have privately mentioned this to the RBA on several occasions, but while the will to remedy the problem appears to exist, nothing has yet been done.

The bottom line is that every time the Governor or Assistant Governors give speeches, they follow-up with crucial Q+A sessions. Often during these Q+A sessions they make remarks about the setting of monetary policy (eg, Guy Debelle's comments on the level of mortgage rates this week), or the current growth pulse in the Australian economy (Glenn Stevens last night), or the magnitude of the inflation pressures we face (too many to remember). These remarks can have immediate effects on SFE-traded government bond, bank bill, and interbank prices, and, of course, the currency. Often the market moves are dramatic if the RBA official makes an especially revealing observation.

Currently, the RBA's media office releases the text of the formal speech live, but only follows-up with the Q+A recording and transcript many hours, if not a day, later.

This is a serious market integrity problem. It means that anyone sitting in the audience--often economists reporting back to their trading desks--has access to highly price sensitive information ahead of the rest of the market.

Sometimes Bloomberg will video the speech and Q+A, but only on an ad-hoc basis. And this is only available to Bloomberg subscribers. Further, to the best of my knowledge, it is not possible to access a recording if you miss the video. Again, Dow Jones and Reuters often provide their subscribers with a headline on any significant comment, but they frequently omit crucial remarks, and supply only a truncated version of the text.

The simple solution, which, I think, regulators like ASIC should force the RBA to comply with given they're not prepared to do so of their own volition, is that when an official gives a speech with a scheduled Q+A session, the RBA brings its own small video camera and streams (and records) the session live over the internet.

This is so easy to do it is not funny. And it is a joke that the RBA has not got a fix. It makes both the RBA and ASIC look bad. It is lazy and gives huge informational advantages to a very select group of market participants.