New York Fed Publishes Policy on Confidential Market Information

The Federal Reserve Bank of New York has taken the step of publishing a statement detailing how it handles confidential information from foreign exchange and Treasury market participants.

The NY Fed says it is committed to the use and handling of confidential information about participants in financial markets “in a manner that promotes the integrity and efficiency of these markets, and is consistent with goals of the Treasury Market Practices Group (TMPG) Best Practices and the FX Global Code”. 

It says that its staff may come to possess confidential trading information consisting of non-public information about trading activity or positions of a market participant or its counterparties while conducting domestic or international market operations or gathering market intelligence to support the Federal Reserve’s policy and operational objectives. Consistent with TMPG recommendations, however, the central bank has now summarised and published its practices for handling such information

The bank says it has reviewed and revised its policies covering such information, in light of the TMPG Best Practice Recommendations on Information Handling. It says that several written policies and procedures – including those of the New York Fed and the Federal Reserve System – identify and address the handling of confidential trading information. Additionally, these policies appropriately limit the use and sharing of such information and the New York Fed “does not use or share Confidential Trading Information with the intent of adversely affecting the interests of other market participants”. 

“These policies establish a need-to-know standard for the sharing of any confidential trading information,” the statement says. “They generally provide that confidential trading information may be shared internally with staff engaged in similar domestic or international market operations, or with managers or control functions. 

“Confidential trading information may also be shared internally or externally (subject to appropriate confidentiality agreements) with parties that provide trading support, compliance or auditing functions or official sector oversight of the New York Fed,” it adds. “In addition, confidential trading information may be shared internally with staff that inform and implement policy and with other official institutions with which the New York Fed collaborates on policy implementation. 

“Finally, confidential trading information may be shared with internal or external supervisory and regulatory bodies,” the statement says.

The New York Fed publishes information about many of its trading operations and securities holdings on a regular basis. As required by law, the it also publishes more detailed information about trades, including trade information and counterparties with a two-year lag. Once published, such information is no longer considered confidential. 

The statement concludes by noting, “the New York Fed has internal controls and oversight processes to assure that staff understand and follow the policies and procedures with respect to confidential trading information.”

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Colin Lambert

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