Bloomberg cannot take Wall Street for granted The privacy error could prompt banks and fund managers to reassess the relationship In the three decades since Michael Bloomberg launched his electronic terminal to supply financial information and analytics, his company has been called many things: ambitious, competitive, brilliant, fearsome, relentless and totalitarian. Until now, it wasn't known as stupid. Yet Bloomberg, the company that its founder put under new management to become mayor of New York, has done a foolish thing. It has placed at risk a franchise that depends on the trust of companies, banks and official institutions - and charges them up to $20,000 a year per terminal - for the sake of its journalists getting an edge on some of their stories. Information networks such as Bloomberg, Google and Facebook are some of the most successful businesses of the internet age (one of Mr Bloomberg's insights was to establish a digital-only business before the web browser had even been invented). They enjoy rapid growth and high margins, partly because their customers provide them with information. There is always the temptation to exploit this privilege - in Facebook's case, by loosening privacy to sell advertising. Bloomberg's difficulty is that its customers are tougher and better organised than Facebook's or Google's and pay a lot for its service. They can bite back. That does not only mean central banks such as the Bank of England describing Bloomberg's lapse as "reprehensible." It could mean banks and fund managers, some of which pay it $100m a year, deciding that they do not trust Bloomberg as much as they once did. They could turn to its competitors, such as Thomson Reuters, or they could go it alone - creating their own instant messaging, pricing and data services, in the way that they have established "dark pool" trading platforms to compete with exchanges. The internet has put the technology in their hands. Bloomberg does not have much experience of playing defence because it has spent its life on the attack, outflanking rivals with "the Bloomberg Way" and expanding into news, television and magazines. There is speculation that it wants to buy the Financial Times or The New York Times. It took three attempts to get its response right, finally filling its trading screens with an apology from Dan Doctoroff, its chief executive. It is not used to saying sorry and, like other technology companies, its success has bred arrogance - it tends to think it knows best. "It has a cult-like structure in which everyone is a believer," says one former Bloomberg executive. There is such a degree of holy righteousness that journalism can only be done the Bloomberg Way that I was surprised by a failure of judgment on this scale. Reporters did not have broad access to confidential information, but they could see a subscriber's contact details, and data on how often he or she had, for example, looked up a page of credit default swaps. This might have indicated whether a fund manager had a particular interest in one financial market. This is so clearly an abuse of Bloomberg's access to customer data that it is hard to know what it was thinking. There are some clues in The Bloomberg Way , editor-in-chief Matt Winkler's manual for reporters, which explains his relentless, detail-oriented, no-frills approach to news. The constant collecting of string - details about people, companies, markets and industries - is essential. The best reporters make every effort to obtain all sorts of facts . . . Reporters should know the most important institutions and people on their beats, and collect files and lists on each," he writes. Professionally, it is difficult to argue with that, and it enabled Bloomberg to build a voracious fact-gathering machine. But putting it next to a trove of confidential data was asking for trouble. "It's like telling my four-year-old he can't have a cookie but leaving the cookie jar open," says a Wall Street executive. Wall Street banks have often failed to enforce firewalls between the parts of their business that hold private information and those that trade publicly. As a result, they have suffered scandals over equity research and insider trading. When they did, Bloomberg reported on them fearlessly. Now, they may punish its mistake. With due respect to my profession, news matters little to Bloomberg compared with financial data. News has glamour - it brought Bloomberg into the public eye and it gave the company's founder a profile that launched his political career. But it is ultimately a cost centre rather than a revenue producer, and can easily be put in its place. The bigger issue is what happens to Bloomberg's data, analytics and trading operations as a result. Until now, it has not faced a comparable challenge. It has established a good reputation for efficiency and focus, and traders demanded to work with its terminals rather than the boxes supplied by others. Bank and fund managers have liked its zeal and ambition, and have tolerated its stiff monthly fees, because it has been better at what it did than its competitors. This error will prompt them to take another look at whether the relationship is really worth it. It would not be difficult for them to place limits on the amount of data they share - as many central banks already do. Some brokers provide Bloomberg with private information on bonds and derivatives for it to analyse prices. They could instead employ a rival or form their own data co-operative. In many ways, Bloomberg has shown salutary journalistic independence from the banks that it charges for its terminals and relies upon for data. It cannot, however, depend on their goodwill.