On Wall Street, it’s all about finding an edge — no matter how small or seemingly insignificant. Whether it’s a snippet of chatter in a restaurant, a stray comment on the squash court, or a scrap of barroom banter after work, Wall Street traders are constantly on the hunt for nuggets of information they can use to gain advantage over rivals. Because success on Wall Street is often measured in seconds, access to information equals money. That mentality also applies to the hypercompetitive world of financial journalism, as the unfolding Bloomberg snooping scandal demonstrates. With its wide-open office layout packed with shirt-sleeved employees hunched over banks of flickering data terminals, Bloomberg’s newsroom looks like a take-no-prisoners Wall Street trading floor. Apparently, it has been acting like one as well.
For two decades, reporters at Bloomberg News have been using special access to Bloomberg’s ubiquitous financial data terminals to glean sensitive — and potentially proprietary — information about Wall Street banks, hedge funds, and possibly even financial regulators, according to multiple reports. The blockbuster disclosure, first reported by the New York Post, has pulled back the veil on the cozy relationship between the company’s financial-data service and news-gathering divisions, and could undermine the reputation and client trust it has built over three decades since its founding by Michael Bloomberg, currently mayor of New York City.
On Monday, Michael Bloomberg declined to comment on the matter, citing an agreement he made with the city’s Conflict of Interests Board when he first took office in 2002, in which he said he would no longer be involved in day-to-day operations at the company. Michael Bloomberg has an estimated net worth of $27 billion, thanks in part to his majority stake in the company he founded.
Regulators at the U.S. Federal Reserve and Treasury Department — where Bloomberg terminals are widely used — are investigating whether any of their confidential data has been misused, according to Reuters, and the European Central Bank said it was in “close contact with Bloomberg” about any possible data breaches. As if that wasn’t enough, the Financial Times reported late Monday that in an apparently unrelated incident, more than 10,000 private messages between Bloomberg clients in 2009 and 2010 containing “confidential financial price information and trading activity” had been accidentally leaked online.
The Bloomberg data scandal erupted after Goldman Sachs complained last month that a Bloomberg News reporter had called the bank to ask about a partner’s employment status after apparently tracking the executive’s activity — or lack thereof — on a Bloomberg terminal. Bloomberg has more than 315,000 terminal subscribers around the world, including at virtually every major investment bank, hedge fund, private-equity firm, and institution or regulatory agency that closely tracks financial markets. Each terminal subscription costs about $20,000 per year, and that revenue constitutes about 85% of the nearly $8 billion in sales that Bloomberg posted last year.
Each Bloomberg News journalist has access to a terminal, and was encouraged to “harness” its power to find sources or otherwise bolster his or her reporting, as part of Bloomberg’s hard-charging approach to news gathering. Terminal access has long been a sore spot for the company’s rivals, including Reuters and Dow Jones, which compete against Bloomberg as both providers of financial data and news-gathering operations. Because financial journalism is so fast-paced and data-driven, Bloomberg journalists’ special access could have given them an advantage over their competitors. Needless to say, it was hard not to detect a dose of schadenfreude as Bloomberg’s rivals pounced on the story.
Using their terminals, Bloomberg reporters could see a client’s contact information, login history, information about help-desk inquires and other “high-level types of user functions.” Reporters could see whether a client was examining stocks or bonds, but could not see not specific trades. The access was originally designed to allow Bloomberg’s sales teams to tailor service to clients more effectively, but apparently it had been extended to journalists as far back as the 1990s.
Top Bloomberg executives have reportedly been aware of the sensitive nature of the practice since 2011, when a Bloomberg TV anchor was reprimanded for making a comment on the air about the use of terminal data to track a story subject, BuzzFeed reported. After Goldman Sachs complained last month, Bloomberg cut off the special access for reporters. In a statement, Bloomberg LP CEO and president Daniel Doctoroff called the practice a “mistake,” and said the company had appointed a senior executive to the new position of client-data-compliance officer.
Meanwhile, Matthew Winkler, editor in chief of Bloomberg News, apologized for allowing journalists “limited” access to sensitive financial data about the company’s clients. “Our reporters should not have access to any data considered proprietary,” Winkler wrote in an editorial posted on Bloomberg’s website. “I am sorry they did. The error is inexcusable. Last month, we immediately changed our policy so that reporters now have no greater access to information than our customers have. Removing this access will have no effect on Bloomberg news-gathering.”
Bloomberg terminals have become such a vital and ubiquitous tool on Wall Street that it’s unlikely that the company will face a massive client exodus, especially given the fact that Bloomberg will presumably be extremely sensitive about data security moving forward. Still, many on Wall Street were not amused by the episode, and it’s clear that Bloomberg’s reputation has taken a hit.
“If that’s true and they had access to all of that information, that’s totally ridiculous and Bloomberg should be thrown under the bus,” Michael Cohn, chief market strategist at Atlantis Asset Management, told CNBC. “That’s just so pathetic. I don’t understand how this policy got institutionalized in the first place, and how it was allowed to go on for so long.” But, he added, Bloomberg terminals are “irreplaceable in many ways.”
For years, financial journalists have suspected that Bloomberg reporters used the terminals to aid their work, but the full extent of the practice has never been previously reported — and there may be more revelations to come. On a certain level, one can’t blame the reporters for taking advantage of access they were encouraged by their leaders to use. One veteran financial journalist even called the controversy “overblown.” But the Bloomberg terminal snooping affair is noteworthy because it reveals how Wall Street’s ingrained culture of gaining an edge — no matter how small — over the competition seems to have been replicated at a news organization where the very mission was to report on Wall Street itself.
Like Wall Street, financial journalism can be intensely competitive, with reporters seeking any sliver of advantage over rivals. For Bloomberg, the terminal-snooping episode underscores the importance of keeping the financial-data service and editorial sides of the business separate. On Wall Street, as in journalism, trust means everything. As Will Rogers is reported to have said, “It takes a lifetime to build a good reputation, but you can lose it in a minute.”