Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Does the BIS care about insider trading?

Governments are today extremely careful to ensure non discriminatory disclosure of
sensitive data at the same time to all. Supranational bodies also normally observe this
discipline. Even where they hold press conferences ahead of public disclosure, they
are subject to clear embargoes that are complied with. In this context, the early
disclosure of BIS data on petrodollars is quite disturbing. Steve Johnson reported
the data in the Financial Times a day before it became public.

The following chronology would put things in perspective

  • November 28, 2005. Stephen Roach, Chief Economist of Morgan Stanley, wrote
    a report stating
    that most OPEC current account surpluses were not being invested in dollars.
    This clearly pointed to possible dollar weakness,
  • November 30, 2005. Brad Setzer contested this in his
    blog arguing that OPEC was parking
    dollars offshore
  • December 2, 2005. Dr. Harm Bandholz of HVB analyzed data from several sources to come up with an
    analysis
    similar to that of Brad Setzer.
  • December 4, 2005. Steve Johnson writing in the Financial Times quoted BIS data
    showing that “Middle Eastern oil exporters have rediscovered their love of the US dollar”.
  • December 4, 2005. Brad Setzer commenting on this report in his
    blog lamented
    that he could not find this data at the BIS web site. When I visited the BIS site, I also found that
    the December quarterly review was still not live on their site.
  • December 5, 2005. The December quarterly review went live on the
    BIS web site.
    The web site clearly indicates December 5, 2005 as the date of the report.

This chronology establishes that the issue of what was happening to petrodollars was important to market participants, analysts
and academics. This was an issue being debated quite earnestly. It is also clear that the BIS report contains data pieced together
from a number of sources that adds materially to our understanding of the situation. By any standards, it constitutes “material price
sensitive information” that should not have been disclosed in a selective manner.
It is even more lamentable that the central bankers’ central banker should be guilty of such a lapse.

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