Following revelations that Bloomberg News reporters had used the Bloomberg terminals — ubiquitous in the finance sector — to spy on some banker activity, the Financial Times reported Tuesday that thousands of private messages sent between terminal users have been leaked online and available for public view for some time. The latest news “undermin[es] he company’s attempts to restore faith in its ability to keep client data confidential as it scrambles to allay clients’ privacy concerns.”
Bloomberg has responded that the messages were willingly made available to them by clients, but their availability online to the broader public certainly “threatens to unnerve clients,” as the FT noted.
The FT reported:
Two long lists showing confidential Bloomberg messages between traders at dozens of the world’s largest banks and their clients have been online for several years, the Financial Times has learnt. Two long lists showing confidential Bloomberg messages between traders at dozens of the world’s largest banks and their clients have been online for several years, the Financial Times has learnt.
The documents from one particular day in 2009 and also from 2010, contain messages sent in by clients so Bloomberg could extract price data for their use on bonds, credit default swaps and other financial products from traders’ messages.
The messages had been found, a financial markets professional said, through a simple Google search. They were taken down from the internet on Monday, after the FT inquired about them.
They showed information such as unique Bloomberg user identifiers, real names and traders’ email addresses as well as confidential financial price information and trading activity.
Bloomberg Admits Terminal Snooping
Por Amy Chozick [The New York Times, 13/5/13]
Reporters at Bloomberg News were trained to use a function on the company’s financial data terminals that allowed them to view subscribers’ contact information and, in some cases, monitor login activity in order to advance news coverage, more than half a dozen former employees said.
More than 315,000 Bloomberg subscribers worldwide use the terminals for instant market news, trading information and communication. Reporters at Bloomberg News, a separate division from the terminal business, were nonetheless told to use the terminals to get an edge in the competitive world of financial journalism where every second counts, according to these people, who spoke on the condition of anonymity because of the company’s strict nondisclosure agreements.
The company acknowledged that at least one reporter had gained access to information on Goldman Sachs after the bank complained to the company last month. On Sunday, Ty Trippet, a Bloomberg spokesman, said that “reporters would not have been trained to improperly use any client data.”
Matthew Winkler, editor in chief of Bloomberg News, underscored that the practice was at one time commonplace. In an editorial published on Bloomberg View late Sunday night, he said the practice of allowing reporters access to limited subscriber information dated back to the inception of the news arm of the giant financial information company founded by Michael R. Bloomberg.
“The recent complaints relate to practices that are almost as old as Bloomberg News,” Mr. Winkler said. “Some reporters have used the so-called terminal to obtain, as The Washington Post reported, ‘mundane’ facts such as logon information.”
It was a striking admission from the man who wrote “The Bloomberg Way: A Guide for Reporters and Editors,” considered among the quintessential handbooks on ethical business reporting.
In his editorial, Mr. Winkler apologized for the practices that had taken place in the newsroom for decades. “Our clients are right,” he said. “Our reporters should not have access to any data considered proprietary. I am sorry they did. The error is inexcusable.”
Bloomberg’s more than 2,400 journalists go through hours of compulsory training on how to use the superfast data-splicing terminals, and several former employees said that training included informal tips on how to use a function called UUID to locate sources who were also subscribers.
The sheer amount of data available on the terminals created a dynamic in the Bloomberg newsroom in which some reporters favored breaking news over strict subscriber confidentiality, former reporters said.
“There was always a discussion in the newsroom of how to use the terminals to break news,” said one former Bloomberg journalist. “That’s where it gets nuanced because I’m sure that in encouraging people to break news, Matt did not mean in this way,” this person added, referring to Mr. Winkler.
On Friday, Mr. Winkler reminded reporters of the company’s policy that prohibits journalists from discussing nonpublic Bloomberg documents and proprietary information about the company and its clients in their reporting. Last month, he contacted Goldman Sachs to apologize after the bank had complained about the reporting technique.
Bloomberg reporters also are accused of monitoring JPMorgan Chase executives’ login information last summer, when the bank suffered a multibillion-dollar trading loss, according to people briefed on the situation. The bank never formally complained to Bloomberg representatives about the practice.
The Federal Reserve and Treasury Department are also investigating whether reporters tracked employees. Bloomberg terminals sit in the highest echelons of power — including central banks, rival news organizations, Congress and even the Vatican.
Daniel L. Doctoroff, chief executive of Bloomberg L.P., said that making limited customer data available to reporters was a “mistake” and that it would not happen again. The company said the functions that led to the controversy had been disabled in the newsroom last month. The company also appointed a senior executive to the newly created role of client data compliance officer. (Mr. Bloomberg stepped back from the company’s day-to-day operations when he became mayor of New York.)
Bloomberg executives have not denied that they knew some reporters turned to the terminals to monitor when subscribers, who are mostly traders and finance executives, had logged on. On less frequent occasions, reporters also monitored chats between those subscribers and customer service representatives. Reporters could not see a subscriber’s specific securities, trades or which news articles they had read.
Mr. Winkler did not expand on who may have been affected. He said the practices were a legacy left over from when reporters were considered part of the sales operation. Nearly 85 percent of the company’s $7.9 billion in 2012 revenue came from its terminal business.
The news operation was assembled in the 1990s primarily as a way to sell more terminals. Reporters regularly accompanied sales representatives to sell subscribers on the wonders of the terminal, the desktop computers that provide a constant stream of headlines and data and sit upon many traders’ desks.
The company has said the close relationship between journalists and the sales team meant there was a reason to allow reporters access to limited subscriber data to help with customer service and to customize news to subscribers’ needs.
The UUID function at the center of the current controversy provided background on an individual subscriber, including contact information, and when the subscriber had last logged on. An internal Bloomberg review conducted after Goldman Sachs complained last month that a reporter had inquired about a partner’s employment status after tracking the executive on UUID, revealed that “several hundred” reporters had used the technique. Mr. Trippet, the company spokesman, said no reporters had been fired.
In 2011, Erik Schatzker, a host of Bloomberg Television’s “Market Makers” show, said on the broadcast that he had used a terminal subscriber’s data to report on a finance executive. The episode set off concerns inside the newsroom.
After Mr. Schatzker made the remarks, which were first reported by BuzzFeed on Saturday, Bloomberg conducted an internal review. Executives thought the terminal functions that allowed reporters to see subscriber data had been disabled, said one person briefed on the review.
On Friday, Mr. Doctoroff also tried to ease subscribers’ concerns. “Reporters only have access to the same customer relationship data available to our clients,” he said, adding, “Client trust is our highest priority.”
Bloomberg finds that sorry is the hardest word
Por Andrew Edgecliffe-Johnson [Financial Times, 13/5/13]
Bloomberg is not used to apologising. Since Michael Bloomberg sold his first data terminal in 1982, its obsessive focus on cutting-edge technology and industry-beating customer service has made it a market leader in a financial data industry once dominated by older firms such as Reuters and Dow Jones.
Its news operation has grown to 2,400 journalists at a time when many longer-established newsrooms have been slashing staff; winning prizes and moving markets with its precise and seemingly transparent style of journalism, much of its output is informed by the data its terminals produce.
The strength of Bloomberg News, bolstered by sales of $20,000-a-year terminals to more than 315,000 subscribers, has made it a model for some commentators as the news industry searches for sustainable business models other than a traditional reliance on advertising.
In the middle of Sunday night, however, the company found itself apologising for the second time in three days for “a mistake” that has caused clients to question a core principle running through Bloomberg’s commercial and editorial operations: that clients can trust it with the market-moving information they glean from, and share over, the terminal.
“The error is inexcusable,” wrote Matt Winkler, editor-in-chief of Bloomberg News and author of one of the news industry’s best known ethical handbooks, The Bloomberg Way, on Sunday night.
The error was to allow reporters to access information from the terminal that other users could not see. This included details of when clients last logged on – often a clue as to whether someone has been fired – what dealings they had with Bloomberg’s helpdesk and which of the terminal’s 15,000 functions they were using.
Goldman Sachs uncovered the practice after a reporter in Hong Kong queried whether one of its partners had moved, noting that he had not logged on in some time.
Bloomberg, which likes to boast that its terminals can be found everywhere from the Vatican to the White House, has since faced criticism from some of its largest clients. Banks including JPMorgan Chase, and central bankers from Brussels to Washington, are demanding answers.
In his Sunday night editorial on Bloomberg’s website, Mr Winkler admitted: “Our client is right. Our reporters should not have access to any data considered proprietary. I am sorry they did.” But he also sought to play down the severity of the error. Reporters were typically seeking “mundane” facts, and watching which functions a client used. It was “akin to being able to see how many times someone used Microsoft Word vs. Excel,” he said.
Bloomberg has cut off reporters’ access to the information under scrutiny and appointed a chief data compliance officer. A senior banker at a European lender said he was impressed that Bloomberg’s management had been calling executives at large clients to reassure them.
Whether those moves and two apologies will be enough, however, remains unclear.
Mr Winkler did not address reports that the company discussed limiting reporters’ access to clients’ data in 2011, explain what internal investigation it had done or pledge any review of the close relationship between Bloomberg’s news and sales teams. This contrasts with the Chinese walls other news outlets maintain between their editorial and commercial operations.
His editorial, entitled “holding ourselves accountable”, made no mention of whether Bloomberg would bring in any independent outside figure to verify that it has made sufficient changes to reassure its users, as some other newsrooms have done when ethical questions were raised.
Rupert Murdoch, the News Corp chairman whose UK newspaper arm remains embroiled in investigations into phone hacking and other accusations, tweeted about “Bloomberg reporters spying on financial clients!”, describing the story as a “biggie”.
Schadenfreude was also palpable among some subjects of Bloomberg’s reporting.
“I think it’s highly unlikely they got anything heavy, but it just looks awful,” one senior financial communications executive said. “I think it’s just an arrogant organisation,” he added. “A lot of people are enjoying the fact they’ve been caught slightly with their pants down.”
Subscribers Fear Bloomberg Is Becoming Their Rival
Por Peter Eavis e Nathaniel Popper [The New York Times, 14/5/13]
Long thought of as a company that serves the needs of Wall Street firms, Bloomberg L.P. is quietly becoming more like them, moving recently into businesses that have been the domain of the largest banks.
This relatively unheralded expansion by Bloomberg helps explain Wall Street’s consternation at recent disclosures that some customer data was freely available to reporters and others inside the company. The fear inside banks is that Bloomberg could use that data not only to write negative news articles but also to compete directly.
In recent years, Bloomberg has offered new ways to trade stocks, bonds and more complicated financial products, potentially taking revenue from subscribers to the ubiquitous Bloomberg desktop terminals, which contain a vast store of market data. The expansion is even leading Bloomberg to offer traditional Wall Street services like wealth management and research.
“If you add all this stuff up together, they do look increasingly like a brokerage business,” said Larry Tabb, founder of the consulting firm Tabb Group.
He said that Bloomberg was not yet a dominant force in these activities and had been careful to placate the concerns of subscribers. But, he said, “it makes some of these brokers think, are these guys friend or foe?”
Bloomberg says its trading operations are walled off from its data operations and asserts that it has won the trust of clients over the years. The company is eager to protect both its revenue and the wealth of Michael R. Bloomberg, which are still primarily generated by the terminals business.
But the sources of revenue are changing.
Bloomberg’s expansion has been motivated in part by a slowdown in the core terminals business. Before the financial crisis of 2008, executives had created the 10B initiative, which had the aim of increasing the company’s annual revenue to $10 billion by 2014, according to company employees who spoke on the condition of anonymity out of fear of jeopardizing their careers. Last year, with revenue stuck at about $8 billion, this goal has been quietly de-emphasized, the employees said.
The expansion has taken place in many new areas, including products that provide political and sports intelligence. But the continuing efforts to capture Wall Street business are particularly tricky because they risk alienating the financial firms that pay for most of the terminals.
“They have to be very careful in how they sell themselves, and who they broker to,” said David B. Weiss, a senior analyst at the Aite Group. “You don’t want to mess with a $6 billion a year golden goose.”
Bloomberg executives have said the firm is only moving into areas that complement its core business of allowing customers to analyze data and communicate with subscribers. Lengthy contracts stipulate the ways that Bloomberg can use information it gathers about terminal users.
Still, financial companies are seeking assurances from Bloomberg that important data is not finding its way into divisions at the company that could exploit it. Bloomberg executives apologized after Goldman Sachs and other banks complained that Bloomberg’s journalists were able to look at information about when customers logged in and what functions they were using.
People close to the company said Tuesday that the same data had been accessible to employees in its trading division, known as Bloomberg Tradebook, but that the company had cut off that access recently.
Bloomberg has said from the beginning that it shields specific trading activity of customers from employees not authorized to see it.
The criticism of Bloomberg has been caused in part by Wall Street’s desire to push down the steep $20,000 yearly price tag for a Bloomberg terminal. Many bankers say they have little choice but to pay if they want to communicate with their customers, most of whom are on Bloomberg’s networks.
Thomson Reuters, Bloomberg’s primary rival in the data world, also provides trading capabilities, but it rarely vies for the trades itself and emphasizes what it calls its neutrality. The company has not moved into many of the business lines where Bloomberg is now looking to make money.
“Our strategy is to partner with our customers and not to compete with them,” said Yvonne Diaz, a spokeswoman for Thomson Reuters.
The most obvious business line that competes with Wall Street is Tradebook, a subsidiary of Bloomberg that is registered to trade on behalf of clients, collecting valuable commissions for each trade. It is fighting for those commissions with trading desks across Wall Street.
Tradebook was originally created in 1996, 14 years after Mr. Bloomberg founded the larger company. For many years, Tradebook failed to gain much traction, but in 2010 it hired an ambitious new chief executive, Ray Tierney, from Morgan Stanley.
Mr. Tierney has helped Tradebook win a greater market share in stocks and options and has developed new products. Last fall, it introduced Bloomberg Pool, which serves as a competitor to Wall Street’s dark pools, where stock trades are executed away from the public exchanges.
Beyond Tradebook, Bloomberg’s clients use the company’s software to look for and execute trades in many different markets, putting the company at the center of the information flow between buyers and sellers. Bloomberg says this data is protected even within the company.
Bloomberg will be adding to its trading operations soon, when it introduces a type of electronic exchange for financial instruments known as swaps, one of the most heavily traded products on Wall Street. Bloomberg expects to charge customers for using the service.
Like other Wall Street firms, Bloomberg has not been afraid to resort to legal muscle to protect its swaps business. It has hired a top Washington lawyer, Eugene Scalia, to challenge rules for the swaps exchanges that were proposed by the Commodity Futures Trading Commission.
The company contends that the commission’s rules could prompt investors to move out of the swaps market into another market that could be weaker and less transparent. But some industry officials have argued that the case is motivated by Bloomberg’s desire to bolster business for its own swaps trading operation.
Bloomberg is even showing signs that it wants a slice of that most traditional of Wall Street businesses, investment advice for individuals. Its offering in this area, BloombergBlack, is in a testing phase. It is intended to serve somewhat like a scaled-down Bloomberg terminal for investors at home. Automated money management is seen as a growth opportunity by many brokerage houses.
“The perfect customer for this is a guy who’s done a lot of investing and it’s a hobby for him,” said Joshua Brown, a financial adviser at Fusion Analytics, and author of the Reformed Broker blog. “That’s a pretty good market.”
More Clients Ask Questions of Bloomberg
Por Amy Chozick e Ben Protess [The New York Times, 14/5/13]
With new concerns emerging about practices at its news division, Bloomberg L.P., the sprawling financial services company founded by Michael R. Bloomberg, scrambled to shield its lucrative terminal business and appease nervous customers.
The report on Friday that a Bloomberg reporter had used the company’s financial data terminals to monitor a Goldman Sachs partner’s logon activity has set off a ripple effect of inquiries from other worried subscribers, including JPMorgan Chase, Deutsche Bank, the Federal Reserve, Treasury Department and the European Central Bank.
The revelations now stretch back to 2011, when UBS complained after a Bloomberg Television host alluded on air to his monitoring of the London-based rogue UBS trader Kweku Adoboli’s terminal logon information to confirm his employment status at the bank. Then, last summer, executives at JPMorgan Chase questioned Bloomberg reporters’ techniques after they were among the first to report on the trader Bruno Iksil, nicknamed the London Whale. “I’m unaware of any record of a complaint from either bank on this issue,” said Ty Trippet, a Bloomberg spokesman. The fallout continued on Monday. Bloomberg has now received roughly 20 inquiries about whether reporting practices violated the company’s policies about getting access to subscriber information, including one from Bank of America. The bank also contacted Bloomberg to raise questions about the security of its employees’ private information, people briefed on the matter said.
Citigroup and other Wall Street banks have also contacted Bloomberg in recent days, according to these people, who spoke on the condition they not be identified discussing confidential conversations. The banks all declined to comment. In response, the company has been contacting subscribers.
“Since the news came out, my executive team and I have personally reached out to more than 300 clients,” Daniel L. Doctoroff, chief executive of Bloomberg L.P., wrote in a blog post late Monday night. “We started each conversation with an apology.” A person briefed on those conversations said no one immediately canceled their subscription.
Every Bloomberg user who logs onto a terminal is greeted with a screen that contains a letter from Mr. Doctoroff calling the practice a “mistake” and addressing privacy concerns. The company is preparing a blog where subscribers can discuss concerns about data security. Bloomberg subscribers pay on average about $20,000 a year to lease each terminal.
Mr. Bloomberg, who stepped away from day-to-day operations when he became mayor, declined to comment on the situation at the company that bears his name. “No, I can’t say anything. I have an agreement with the Conflict of Interests Board,” he said in a news conference on Monday.
The company also began to discuss possible legal ramifications. While people close to the company doubted that clients would threaten legal action, Bloomberg hired outside lawyers on Friday to steer it through the crisis. The lawyers, according to the people close to the company, have assured Bloomberg that there is no basis for a lawsuit, since the subscribers did not suffer any damages and the information obtained was more trivial than confidential. An early analysis conducted by Bloomberg further suggested that reporters rarely, if ever, published stories based solely on information gleaned from the terminals.
The people close to the company also noted that Bloomberg’s sales agreement with subscribers disclosed that company employees had access to certain private information. While the agreement did not specify that Bloomberg News reporters were among those with access, the journalists are technically employees of Bloomberg L.P.
But some bank executives said the snooping could have violated a common confidentiality clause in their contracts with Bloomberg. In the clause, Bloomberg promises to keep large swaths of information “in confidence,” meaning that it won’t be shared with “third parties.”
One Wall Street executive, who asked not to be named because of a firm policy prohibiting employees from speaking to the media, said his company was involved in a sensitive situation last year and he now wondered if reporters were monitoring his activities.
“Looking to see who is in or not is sleazy but hardly earthshaking,” he said. “But if they knew what stocks I was clicking on and what yields I was looking at, that is spying.” (Bloomberg officials have repeatedly said the functions used by reporters did not provide information on specific trades or securities.)
Another top Wall Street executive, who also asked not to be named, said although he did not know if his firm would take action, he planned to raise this issue with his board. “I don’t like it when something happens that hasn’t occurred to me, and this had not occurred to me,” he said. “I feel violated.”
After the UBS and JPMorgan Chase complaints, Matthew Winkler, editor in chief at Bloomberg News, instructed his chief of staff, Reto Gregori, to make sure the newsroom’s use of a function called UUID had been cut off, according to a person with direct knowledge of the matter. Mr. Trippet denied that Mr. Winkler had made that request.
The UUID function allowed reporters to view a specific subscriber’s contact information, when the subscriber had last logged on and to monitor chats between subscribers and customer service representatives. But some reporters continued to use the function until last month, when Goldman Sachs executives contacted Mr. Doctoroff directly to complain.
“Last month, we immediately changed our policy so that reporters now have no greater access to information than our customers have,” Mr. Winkler wrote in an editorial on Sunday.
Bloomberg has at least 315,000 subscribers, and its proprietary terminals reign supreme on most traders’ desks. But the business Mr. Bloomberg pioneered took a hit during the financial crisis of 2008. Even as Wall Street recovered, some financial institutions questioned the steep price of the terminals. The price tag, combined with the breach of privacy accusations, have aggravated tensions between Bloomberg and its subscribers, several Wall Street executives said.
The concerns also presented a rare opportunity for Bloomberg’s competitors to challenge the behemoth. Top executives at Interactive Brokers, an electronic brokerage firm that offers data services, met on Monday to discuss whether they should take additional steps to protect the privacy of clients. Thomas Peterffy, the firm’s chief executive, also saw an opportunity to pitch his data to Bloomberg clients angered over the recent breach.
“It’s good from our point of view,” Mr. Peterffy said. “Some people might want to look around for other options.”
What is more, a report in The Financial Times that a former Bloomberg employee had leaked online thousands of messages from a single day in 2009 and a week in 2010 between terminal subscribers threatened to further fray trust between Bloomberg and the hedge funds, investment banks and money managers who use the service. A Bloomberg spokesman said if The Financial Times report was true and the former employee had posted the messages, they would have been collected only in cooperation with clients to improve their technology.
The Wall Street executive who expressed concerns over being spied upon by Bloomberg said the price the company charged for service added insult to injury.
“They pretty much have a monopoly,” he said. “I am fed up and now they do this. I honestly would pay as much for three-quarters of the data just to get away from them.”