By Alister Bull
WASHINGTON (Reuters) - The U.S. Federal Reserve said on Tuesday it was following up with news organizations over a report of unusual trading around the release of its monetary policy statement last week.
The report by CNBC television cited a wave of trading activity in Chicago at 2:00 pm ET (1800 GMT) on Wednesday that appeared milliseconds ahead of other trades based on the Fed's surprise announcement that it was not tapering its bond buying.
The policy-setting Federal Open Market Committee's decision not to start scaling back purchases from an $85 billion monthly pace spurred a broad rally in financial markets, including gold.
"Some traders in Chicago appear to have had access to the Fed's decision before anyone else in the Windy City," CNBC said in its report.
CNBC credited Chicago research firm Nanex for spotting significant activity in Comex gold futures, traded in Chicago, which it calculated was five to seven milliseconds ahead of a subsequent spike in gold transactions in New York.
Nanex said traders in New York would normally have had about a five milliseconds advantage over traders in Chicago on news coming from Washington, because of their proximity to the nation's capital and the time it takes for the data to be transmitted.
The Fed hands out the FOMC statement to news organizations shortly before the official release time but transmission is strictly prohibited until 2:00 pm.
A Fed spokesman said the central bank would follow up with news organizations to ensure they properly understood its procedures for embargoes.
"As is generally the case with other releases of market-sensitive information by government agencies, news organizations receiving embargoed information from the Federal Reserve agree in writing to make no public use of the information until the time set for its release," a Fed spokesman said.
Paula Keve, a spokeswoman for Dow Jones, said the firm "will continue to work with the Fed cooperatively to report in full accordance with their desires."
Nanex chief executive Eric Hunsader said there were $800 million worth of futures contracts traded in Chicago in the first seven milliseconds after 2:00 pm ET on Wednesday, mostly in financial and precious metals futures contracts.
"This is unusual because it takes information seven milliseconds to go from Washington to Chicago," he said. "So it could not have been traded on the Fed news, meaning that the news must have been already in Chicago. This raised my eyebrows."
(Additional reporting by Doris Frankel in Chicago; Editing by James Dalgleish and Krista Hughes)