Media Release Statement by the Governor, Mr Ian Macfarlane

Review of the Reserve Bank's Arrangements for Releasing Market-Sensitive Information

Following the premature release of the 2 February Monetary Policy Announcement, the Bank indicated that it would conduct a review of its arrangements for the release of market-sensitive information. That review* – conducted by Mr Ric Battellino and Ms Clarita Imperial – has now been completed, and is available to the public either in hard copy or on the Bank's website.

I have accepted the recommendations contained in the review, some of which are already in the process of being implemented. The main findings were as follows:

  1. The premature release on 2 February was due to a computer-input error by a staff member in the Information Office, and was not motivated by malice or the desire for gain.
  2. The event exposed weaknesses in the Bank's procedures. These mainly revolve around the practice of pre-loading releases into e-mail and fax systems. These practices arose from a desire on behalf of the Information Office to maximise the level of service to “clients”. The review judged, however, that they involved the running of excessive and unnecessary risks. The practice of pre-loading for fax and e-mail has now ceased.
  3. The review found that the electronic news services were the most efficient form of news delivery for professional financial market participants, while the Bank's website was the most appropriate means for distributing releases more widely through the community. Faxes and e-mails will be terminated completely for monetary policy releases, and limited to the media for other releases.
  4. The review concluded that the number of staff in the Information Office, and their level of expertise, are adequate to allow the Office to carry out the functions set by the Bank. Tighter management control is needed, however, to ensure that staff give more weight to security, even if, at the margin, it is at the expense of customer service. Disciplinary action has been taken against some staff in the Information Office, including transfer to other duties and reduction in pay.

I have decided against releasing the names of the 62 people who were on the now discontinued e-mail list. I have done this on the grounds that it would serve no useful purpose, and could impugn innocent people as all those on the list would be subject to the suspicion of having acted on the information, even though the majority did not open the e-mail before 9.30 a.m., or did not (or were not in a position to) trade on the basis of this information. Some general information on the composition of the mailing list is contained in the report.


Mr R. Battellino
Assistant Governor
(Financial Markets)
(02) 9551 8200

Report on Arrangements for the Release of Market-sensitive Information

1. Current Arrangements

The publication of information by the Reserve Bank is handled by the Information Office, a section of eight people within Secretary's Department. This Office typically processes about 1,000 media releases a year, with releases varying from very sensitive to routine, as well as handling the Bank's publications, inquiries from the media and public, and monitoring of the media.

Releases which could be classed as market-sensitive include the following:

  • Monetary policy changes
  • Semi-Annual Statement on Monetary Policy
  • “Quarterly Report on the Economy and Financial Markets” in the Bulletin
  • Governor's Opening Statement to the Parliamentary Committee
  • Treasury note and bond tenders (announcement of tenders and results)

Of these, changes to monetary policy stand out as being much more sensitive than the others.

Each of these releases has its own set of procedures to be followed, but the key steps are similar. They are illustrated below for announcements of monetary policy changes.[1]

  • A copy of the document, both electronic and hard copy, is delivered to the Information Office (the latter initialled by the Secretary, as a sign of its authenticity).
  • Two of the most senior officers in the Information Office (the Manager and the Senior Information Officer) prepare the document for publication on electronic news services (one doing the work, the other checking that work). Publication takes place via the Bridge Publishing System, a software program supplied by Bridge that transmits the document simultaneously to the four electronic news services: Bridge; Reuters; Bloomberg and Dow Jones Markets. This arrangement has a number of advantages ­ eg it allows the Bank to maintain absolute control of the document until it is released and simultaneously feeds it to all the news services, thus avoiding the need for media lock-ups and embargoes, on which some other central banks rely. Nonetheless, it still has some shortcomings. The main problem is that the Bridge Publishing System does not directly accept documents created by Microsoft Office applications, so some editing of documents needs to take place.[2]
  • While the senior officers are preparing the document for distribution to electronic news services, arrangements are also put in train to distribute it through other channels:
    • Hard copy – a junior officer in the Information Office takes a number of photocopies, for circulation within the Bank and for distribution to the public via the desk on the ground floor. These copies are made on a photocopier within the Information Office, with the officer remaining next to the machine during the copying process to retain control over the document.
    • E-mail – the Senior Clerk (Media) prepares to e-mail the document to 62 external recipients and 59 Bank staff.[3] Inclusion on the e-mail list had been open to anybody who wished to receive the document in this form.[4] In sending these e-mails, the officer involved often makes use of a facility in the Microsoft program which allows pre-loading of the message for deferred transmission. This is done to ensure delivery at the scheduled time.
    • Faxes – the Senior Clerk (Media) also sends the document to an external faxing service that is used to facilitate simultaneous transmission of faxes, to 99 recipients.[5] To ensure faxes are available to the recipients on the scheduled release time, documents are pre-loaded into the external faxing service's system about half an hour before release. This is done either by putting a hard copy through a special fax machine or by using a PC-based fax transmission system. The originating officer specifies the release time as part of the message sent to the external faxing service.
  • Around 9.15 am, the Information Office hand delivers a hard copy of the release to the Domestic Markets Dealing Room. The Domestic Markets Dealing Room includes the first paragraph of the release on its usual 9.30 am release on daily market operations. (This is typically the first place market participants look to see if monetary policy has been changed.) At 9.30 am, the Information Office and the Domestic Markets Dealing Room co-ordinate the simultaneous release of the Bank's market operations page and the full monetary policy statement through the Bridge Publishing System.
  • Immediately after 9.30 am, arrangements are made to put the release on the Bank's web site. This typically takes about 15 minutes to complete.

2. What Went Wrong on Wednesday, 2 February?

The early release of the monetary policy announcement via e-mail on that day was a case of human error. The immediate contributing factors were the absence on leave of the officer who usually carries out this function, insufficient care by the relieving officer in carrying out her duties and inadequate supervision. The more fundamental cause, however, is that, in order to try to provide the greatest possible level of service to “clients” in terms of timely receipt of releases, staff of the Information Office have adopted procedures which carry risks.

In detail, the events of 2 February were as follows:

  • The officer who normally undertakes the distribution of faxes and e-mails, the Senior Clerk (Media) was on leave. She was being relieved jointly by the Customer Services Officer and the Senior Clerk (Publications). The former had logged onto the computer but the latter had taken over to send the e-mails.
  • Even though the officer who sent the e-mails was trained and experienced in the use of this facility, she made an error in that while she specified (at 9.24 am) that the message should be sent with a
    7 minute delay, she did not activate this option in the dialogue box; rather she left the “immediately” option (the default option built in by Microsoft) activated. When she then clicked the “OK” button, the computer sent the e-mails immediately. Our assessment is that the officer did not take due care in carrying out this function.
  • This officer was largely unsupervised during this time, which, given the sensitivity of the documents she was working with, reflected a significant management shortcoming.
  • The Senior Clerk (Publications) immediately realised her error and contacted the Manager, Information Office. After quickly considering the problem, the latter decided to send another e-mail message saying that the contents of the first message were embargoed until 9.30 am. This second message was sent at 9.28 am. To the extent that the second message was received by market participants before 9.30 am (and it is not clear whether this was the case) it would have only served to make matters worse as it would have confirmed the authenticity of the first message. The impact on financial markets of the early release of the monetary policy change is described in the Appendix.

3. What are the Risks in Current Arrangements?

Our review of arrangements for releasing market-sensitive information suggests there are five risks the Bank faces.

3.1 Premature release of the information through one of the various distribution channels (electronic news services, e-mail, faxes, hard copy and the Bank's web site).

Our assessment is that controls over these risks are weakest in the areas of e-mails, faxes and hard copies. In particular, the “service-oriented” culture of the Information Office has led staff to adopt procedures designed to provide the greatest possible level of service to “clients” without due regard for the risks to the Bank. Most obvious is the practice of pre-loading faxes and e-mails ahead of the release time, to ensure delivery right on the scheduled release time. The practice of preparing multiple hard copies (some of which are circulated within the Bank) ahead of the scheduled release time is also a source of unnecessary risk. These practices leave the Bank open to the risk of premature release due to human error (as occurred on 2 February) or to a computer system fault.

There is also some risk of premature release via the electronic news services as the information is, by necessity, loaded into the computers that feed these services. Accidental clicking on the “update” button could, for example, transmit the information prematurely. This risk is at present curtailed by having senior staff in charge of these functions, but controls could be further strengthened by modifying computer systems to require a two-step process before transmission is activated.

There is also a risk, in the case of monetary policy releases, that the co-ordination of timing between the Information Office and Domestic Markets Department could break down, since the two are operating from different parts of the Bank. Controls over this risk, however, seem very tight.

3.2 Errors in media releases

This risk arises because releases require some re-editing before the Bridge Publishing System can accept them. Current procedures for preparing a media release before it is given to the Information Office focus on ensuring that the “hard copy” version is correct. Departments preparing media releases are not generally aware that this version needs to be modified before it can be transmitted via the electronic news services. This re-editing is carried out by the Information Office and not checked by any person outside that Office. While the re-editing is carried out with a great deal of care, the risk of an error exists.

As the electronic versions of media releases are now the ones that are most important, procedures should be changed to make them the focus of attention during preparation of releases by Departments ­ ie the version of the media release sent to the Information Office by the issuing Department should be as close as possible to that which will be transmitted via the electronic news services.

There is also a risk that the Information Office could be supplied with the incorrect version of the release by the issuing Department. While current controls over this are good, they could be strengthened further.

3.3 Leaking of information (deliberately or inadvertently)

In the course of its preparation, a number of people see copies of the monetary policy media release. Also, support staff in the computer department can access the document while it is on the Bank's computer system. Our view is that controls over access to the document prior to its release could be tightened, to minimise the chances of it being leaked.

3.4 Transmission of an unauthorised media release

It is possible that somebody who got access to the e-mail and fax lists or to the Bridge Publishing Software could send an unauthorised release. If it is decided to retain e-mail and fax lists (something which is not recommended for monetary policy releases ­ see below) access to them needs to be very closely controlled. The risk of unauthorised access to the Bridge Publishing Software seems small, as the few computers with access to this software are in secure locations.

3.5 Delays in the release of information

These could arise because of system failure or unavailability of experienced staff, although the latter seems unlikely since there are a number of staff in both the Information Office and Domestic Markets Department with the required skills.

While problems with computer systems are unavoidable, the consequences can be limited by back-up arrangements. As part of these arrangements, Domestic Markets Department, on days when a monetary policy change is to be announced, has a computer support staff in the Dealing Room in the lead-up to the release.

Even so, in the event of a problem with the Bank's computer systems, the back-up computers for the Bridge Publishing System would currently take between 5 and 30 minutes to become operational, depending on the nature of the problem. These arrangements should be reviewed with a view to reducing the delay.

4. Recommendations

4.1 The most obvious need for change is in the handling of e-mails and faxes. In particular, the practice of
pre-loading documents into these systems ahead of release time is very risky (as the events of 2 February showed). It is also unnecessary as the release of documents through these channels is not time-critical; it does not need to take place precisely at the scheduled release time. The electronic news services are the channel relied upon by market participants and others who need to get the news right on the scheduled time.

As a minimum change, the process of sending e-mails and faxes, for any media release, should not begin until after the document has been released via the news services. Only the two senior officers in the Information Office working on the electronic distribution via the Bridge Publishing System should have access to documents (hard copies and electronic) before they are released. This would represent a significant tightening of controls.

More fundamentally, there is the question whether there is any need to send e-mails, or even faxes, to such a wide list of people, given that documents are now posted to the Bank's web site quite quickly after their release. It could be argued that sending e-mails and faxes is helpful to recipients because it saves them having to check the web site to see if there have been any media releases. This reasoning does not carry much weight in the case of monetary policy changes, however, as these changes are often well anticipated and in any case widely publicised soon after their release. It is, therefore, recommended that, for monetary policy changes, e-mail and fax transmission be discontinued. In the case of other media releases, there may be some benefit in sending e-mail and fax transmissions, but the list of recipients should be restricted to members of the media, as these are the primary target of the Bank's releases. With reduced fax lists, there would be no case to continue using an external fax service provider. This practice should therefore be terminated.

4.2 Arrangements for posting releases to the web site should be reviewed to see if the current short delay can be further reduced, and to revisit issues such as contingency arrangements, capacity and security.

4.3 Arrangements for handling the document through the electronic news services seem to work well, but could be improved. For one thing, computer programs should be modified to require “dual control” for the release of documents. This would make checking mandatory and accountable. It would also reduce the risk of an operator accidentally clicking the “update” button ahead of time.

4.4 A range of other changes could be made to reduce risks:

  • to avoid the need for re-editing by the Information Office, Departments preparing media releases should focus on giving the Information Office a version that incorporates the requirements of the Bridge Publishing System;
  • to prevent unauthorised access on the Bank's computer network, including by computer support staff, the document should be protected by tighter security arrangements during its preparatory phase;
  • back-up arrangements for the Bridge Publishing System should be reviewed, with the aim of reducing recovery times;
  • the Information Office's procedures manuals for the release of market-sensitive news need to be improved;
  • access to monetary policy releases before their publication should be curtailed;
  • supervision of the work of the Information Office, particularly during very important media releases, needs to be strengthened. Either the Secretary or the Deputy Secretary, the management layer immediately above the Information Office, should be in attendance at such times to monitor and supervise work flows.

4.5 Finally, our assessment is that disciplinary action is required against some staff in the Information Office as a result of this incident. While the error made by the Senior Clerk (Publications) was unintentional, it did reflect a lack of due care in carrying out her duties. Disciplinary action is also warranted against supervisory staff, as the junior officer was not being adequately supervised given the sensitivity of the information with which she was working, and in view of deficiencies in procedures. Appropriate action should include the transfer of staff and a cut in pay.

5. Other Approaches Considered

We have also considered two broader questions:

  • should the responsibility for handling the release of monetary policy changes be transferred to the Domestic Markets Dealing Room?
  • should the timing of releases be changed?

The case for shifting responsibility for monetary policy releases to the Domestic Markets Dealing Room rests on four arguments:

  • staff in that area have a “zero-risk” approach to the provision of information, as opposed to the “customer-friendly” culture of the Information Office;
  • it would reduce the number of people in the Bank who knew about the release before its publication;
  • it would avoid the need for co-ordination between the Information Office and the Domestic Markets Dealing Room (and the small risk that goes with that);
  • it would take advantage of the greater degree of computer support that exists in the Dealing Room compared with the Information Office, so recovery from a computer failure would be quicker.

Against this, the Dealing Room is already busy at the time of the morning when monetary policy changes are announced, and the familiarity of staff with the Bridge Publishing System is less than that of the senior staff in the Information Office. Messages currently published by the Dealing Room are quite simple, and while staff could learn the more complex arrangements involved in publishing monetary policy changes, their proficiency would decline when there were extended periods of no changes to monetary policy. The Information Office, in contrast, makes frequent use of the System.

We see the benefits and costs in relocating responsibility for monetary policy releases to the Dealing Room as being finely-balanced, if the other changes recommended here are adopted. In that case, there would be little net gain in relocating this function to the Dealing Room.

The case for changing the time of releases is that, if releases were made before financial markets opened, a slightly premature release, as occurred on 2 February, would be less of an issue since nobody could take advantage of it. But the reality of modern financial markets is that, apart from weekends, there is never a period when markets are totally closed; there are only periods of high liquidity and low liquidity. Making announcements of monetary policy changes earlier in the day would, in most cases, simply mean that the release came out in a period of less liquid trading, thereby risking an exaggerated market response. Discussions with market participants do not suggest any case to change the timing of this release.

R Battellino
Financial Markets

C Imperial

18 February 2000


While the Information Office maintains procedures manuals which set out arrangements for each release, these are not sufficiently clear in crucial areas, such as arrangements for sending faxes and e-mails where the advent of new technology has opened up to staff possible courses of action which are not covered in the manuals. [1]

Various characters are not acceptable in the Bridge Publishing System, including commonly used ones – colon, semi-colon, dash and inverted commas (both single and double) – as well as a number of less frequently used characters. These need to be deleted. Other formatting changes which are required include adjustments to fractions, instructions for paragraphs and page breaks, if appropriate. [2]

The Bank's media release of 2 February said that there were 64 external recipients, as two recipients were double counted. [3]

In our view, it would be inappropriate to release the names on the list, as this could subject all these individuals to suspicion of having acted on the information, although in all probability most did not read or act on the information before 9.30 am. The broad categories of recipients are as follows: 11 media companies, 11 governmental and international organisations, 20 financial institutions, 11 companies and business organisations and 9 other recipients. Contrary to some newspaper speculation that the recipients of the e-mails were largely ex-Reserve Bank staff, only 5 recipients were previous employees of the Reserve Bank. [4]

These included 79 media companies and individuals, 15 governmental organisations and 5 others. Recipients were added to the list on request. [5]


The Impact on Financial Markets of the Early Release of the Monetary Policy Statement

The early release of the monetary policy announcement on 2 February had a clear impact on trading on the Sydney Futures Exchange and in the foreign exchange market. It does not seem to have had much impact in physical securities markets. On the Futures Exchange, the main impact was on the March and June 90-day bank bill contracts and the 3-year bond contract. There was little impact on the 10-year bond contract. This pattern is not surprising, since monetary policy news is most relevant for short-term interest rates and the exchange rate. The fact that futures markets were more affected than physical markets is also not surprising, as the greater liquidity of the futures market would encourage traders who were looking to act quickly to trade there.

Futures Market

Normally, when a change in monetary policy is expected to be announced, turnover in futures markets dries up before surging on the announcement itself. By contrast, the figures in Table 1 show a substantial volume of trading ahead of the announcement on 2 February. For example, trading in the March bill futures contract in the six-minute period ahead of the announcement was more than four times the average of similar intervals during the rest of the day. In the 3-year bond futures contract, trading was about three times the average for the day.

Table 1: Turnover in Interest Rate Futures Contracts:
2 February 2000
Bank Bills 3-Year Bond 10-Year Bond
9.24–9.29 am 2,811 601 2,739 406
Average 6-minute interval over the day 674 286 978 254
Daily Total 53,938 22,933 78,206 20,297

The early release of the statement at 9.24 am took a couple of minutes to filter through to the market. The first sign that the market was responding to the information was around 9.27 am, when some large trades began to occur, especially in the March bill futures contract. At first these trades did not move yields, but as more selling occurred yields rose sharply.

The yield on the March bill contract rose by 14 basis points, to 6.01 per cent between 9.24 am and 9.29 am. With the official release at 9.30 am, the yield rose further to 6.06 per cent (Chart 1). Between 9.24 am and ‘end’ 9.29 am, there were 2,811 March bill contracts traded ($2.8 billion). The profit/loss on these transactions is estimated at about $800,000.

Chart 1
Chart 1: Trading in March 90-Day Bank Bill Futures

The volume of trades on the June bill futures contract was less than for the March contract but still higher than would have been typical in the period immediately before an expected announcement about monetary policy. The yield on the June contract rose by 7 basis points, to 6.43 per cent between 9.24 am and 9.29 am. It then rose to 6.50 per cent on the 9.30 announcement. There were 601 June bill contracts traded (about $600 million) between 9.24 and ‘end’ 9.29 am, with a profit/loss estimated at about $150,000.

Chart 2
Chart 2: Trading in June 90-Day Bank Bill Futures

There was also heavy selling of the 3-year bond contract before 9.30 am, with yields rising by 13 basis points, to 6.95 per cent, between 9.24 am and 9.29 am; they then moved up to 7.00 per cent on the official announcement (Chart 3). There were 2,739 contracts traded (about $275 million), between 9.24 am and ‘end’ 9.29 am. The estimated profit/loss was about $1,200,000.

Chart 3
Chart 3: Trading in March 3-Year Bond Futures

The 10-year bond contract was largely unaffected by the early release, with the yield remaining around 7.15-7.16 per cent until 9.30 am. Following the announcement it then rose by 6 points, to around 7.22 per cent (Chart 4).

Chart 4
Chart 4: Trading in March 10-Year Bond Futures

In summary, the aggregate profit/loss from the pre-9.30 am trading on the Futures Exchange is estimated at about $2.2 million.

Foreign Exchange Market

The early release of the monetary policy announcement also affected the foreign exchange market. Hard figures on minute-by-minute turnover through this market are not available because it is an “over-the-counter” market rather than exchange based. Liaison with major market participants, however, suggests that up to $500 million might have passed through the broker and interbank markets immediately before the official announcement was made. As in the fixed-interest market, turnover in the foreign exchange market is normally negligible before an expected announcement on monetary policy. The exchange rate itself rose from US63.20 cents at 9.25 am to US63.70 cents at 9.30 am.

Given the estimated turnover figures, the maximum amount of the gain/loss, if all buying had been undertaken at the lowest reading for the exchange rate (US63.2 cents), and if all the turnover reflected in a change in positions rather than simply churning in the market, would have been about $4 million. Bearing in mind that the buyers of Australian dollars would not all have been able to do so at US63.20 cents and that not all the turnover would have reflected in a change in positions on the Australian dollar, a more realistic maximum on the gain/loss is likely to be about half this.