Apparently, Europeans need to do ‘studies’ to show that markets are rigged. See the study here. Readers of Splitting Pennies understand Forex and how central banks control Forex markets, which is a superset of all other markets.
Although their conclusion is probably correct, their methodology is ridiculous. Their proof that there’s insider trading going on is based on ‘price drift’ which accounts for about 50% of the post-data move.
The European Central Bank published a working paper — which means it hasn’t been peer reviewed as yet — arguing that seven out of 21 market-moving announcements show evidence of “substantial informed trading” before the official release time.The paper identified seven indicators that they said showed “strong” evidence of pre-announcement drift: The Conference Board’s consumer confidence index; the National Association of Realtors’ existing-home sales report and pending-home sales report; the Commerce Department’s preliminary GDP report; the Federal Reserve’s industrial production report; and the Institute for Supply Management’s manufacturing and nonmanufacturing index.
The accused, has a more reasonable answer for ‘price drift’ – it’s because the market expects the numbers to be as expected:
A spokesman for the National Association of Realtors says they take any allegations seriously. He points out that the existing-home-sales report is released from a secure location, that reporters are instructed not to communicate outside of the room, and that the organization monitors the media to make sure data is not disseminated early. He’s said on occasion media organizations have accidentally released data early, apologized to the group and not done so subsequently. The spokesman also suggested, however, that traders may be making educated guesses. The pending-home-sales release tracks closely what the existing-home-sales report eventually shows. A Federal Reserve spokesman declined to comment. Messages left with the Commerce Department’s Bureau of Economic Analysis and The Conference Board weren’t returned.
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