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02:06 PM
Ivy Schmerken
Ivy Schmerken
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Bloomberg Snooping Scandal Prompts Reaction from Goldman

Wall Street firms like Goldman Sachs could look to reduce their reliance on the dominant data and analytics terminal in response to the firms' reporters being allowed to spy on customer data.

In the ongoing fallout from the Bloomberg data security scandal, Goldman Sachs is said to be considering building its own instant messaging application to reduce its dependence on the giant terminal provider.

According to a story in The New York Post, Goldman is weighing this move because it is angry about Bloomberg news reporters using the firm’s data terminals to spy on its employees’ log in habits.

According to Tuesday’s New York Post: Goldman is considering the use of encrypted Twitter accounts or creating such functions as a secure instant-messaging application that could be used within the trading community inside and outside of Goldman.

“There’s a lot of disruptive technology,” said one person familiar with Goldman’s thinking. “This [Bloomberg snooping] has given new energy to those ideas,” the person said.

In contrast to the New York Post's coverage CNBC reported that Goldman doesn't have a major concern with Bloomberg. In an interview with CNBC, Goldman President Gary Cohn said: "We don't have a major concern. We talked to Bloomberg about a month ago. We've had numerous conversations with Dan Doctoroff (Bloomberg's CEO). Dan is completely immersed in the situation. He understands the magnitude of the problem. I think they are really reacting in a positive way in addressing the issues that we might have had." When asked if he was "completely comfortable going forward," Cohn told CNBC, he was giving Bloomberg enough time to understand the issue and allow them to have real data and real information." Cohn added that Bloomberg was doing a very good job at communicating with his firm.

Goldman and J.P. Morgan are two customers that have reportedly complained to the company’s executives about reporters using a so-called Z and UUID function that allowed them to view the login behavior of their traders. In the case of the London Whale, Bloomberg reporters were able to see that Bruno Iksil had not logged in yet and phoned the company to ask if he had been fired yet.

While the company has disabled the function, and apologized to hundreds of its customers, the breach of trust and has opened up a Pandora’s box on Wall Street where customers including buy side firms use many other Bloomberg technology products, ranging from compliance to order management systems. Firms that store their proprietary data on the system would want to know if the news side had access to their investment or trading positions.Goldman has also complained that Bloomberg has used its data to build competing products in specialty areas such as equity trading, according to the Post.

According to Bloomberg's CEO Dan Doctoroff the firm's reporters had no access to the most valuable data.

To be clear, the limited customer relationship data previously available to our reporters never included access to our trading, portfolio, monitor, blotter or other related systems or our clients’ messages. Moreover, reporters could not see news stories that clients read, or the securities they viewed. Bloomberg has very strict data security policies in place, in addition to significant and rigorous training, processes and protocols.

But how easy or hard would it be to create its own system with the critical mass that Bloomberg has developed over the past 31 years?

Such a project would be immense and cost billions, at a time when cost-conscious Wall Street is not undertaking mammoth IT projects, but technology is more open today, and social media makes it possible to send messages quickly.

In the meantime, Goldman is not planning to pull the plug on its Bloomberg terminal usage, according to the Post. But the data leakage has sparked conversations between the broker and Bloomberg about how the data provider uses its client information, according to the Post.

The Federal Reserve and the U.S. Treasury Department are also questioning Bloomberg about how the company’s news staff is able to utilize the data on terminals to examine the activity of government officials.

And CFTC Commissioner Bart Chilton appearing on CNBC earlier in the week suggested that regulation of information systems was necessary.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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