Dow Jones Sees Opportunity in Asia-Pac

Last week, Dow Jones opened up its first co-location facility in the Asia-Pacific marketplace. The Hong Kong-based center will capture economic data from the region and process the data through its Elementized News Feed for member firms in the region looking to algorithmically trade off of news events, according to sibling publication Inside Market Data. Dow Jones already has one foreign-exchange (FX) focused firm signed on to test the feed.

BST spoke with Rob Passarella, vice president and managing director of institutional markets at Dow Jones, to discuss the greater trends he's seeing in the market, and what the vendor's plans are for the region.

What did Dow Jones see in Hong Kong that led to the company building its first co-location facility in the region?

Asia, for the most part, is growing. Across the board, you see a sense of escalation and wanting to do things electronically. It's a normal part of how a market starts to grow. We picked Hong Kong as one of our first points, given the proximity of where we are, as well as where we believe some of the market participants want to pull and transact from. This is our first leg into this; we're looking at the whole region as expanding, and wanting to do more and more algorithmic trading or systematic trading.

How have traders in the Asia-Pacific marketplace become more sophisticated with the strategies they are now employing?

If you think about Asian manufacturing indicators or other government things that are coming out of mainland China and the region, those announcements are having a greater impact. Traders want to get that data faster. That's exactly how the markets in the US grew up. There's a wave.

What challenges exist when dealing with news coming out of China?

The key comes down to getting the data in a format for somebody to want to use either an algo or as part of a transaction. That's really the key. While we see China as a growth piece, there are plenty of other regional markets there that are growing. Yes, we're doing Hong Kong today but there's nothing to stop us from thinking about Singapore and other places. And it's not just classical equity products; it's also foreign exchange and currencies. All of these things are starting to go in a way that they are trading off of elements of news data because it's what's moving their markets.

Is there a greater interconnectedness in the markets from what you saw two, three years ago?

I don't know if it's so much interconnectedness or if it's just the fact that when you have growth, the market starts to mature in a way that allows for these things to happen. The multi-national banks are coming and are taking knowledge that they have from other markets and are trying to bring it to that market. That's one of the keys. You could say the same thing about Latin America. With Brazil and BM&FBovespa, you have a rich market that's growing and folks want to participate. Well, the way to participate now in a market is electronically; it's not human beings anymore. It's machine to machine connectivity and being able to have transactions that way. You're not going to put human beings in there, you're not going to put human brokers anymore, you're going to make the leap and go to machine-to-machine connections.

From a sophistication standpoint, how does the region compare to the US and Europe?

Overall as a market, I always thought it would be a matter of time. But this year alone we have had more conversations with clients about algo and high-frequency trading. And there was even a greater uptick after the May 6 Flash Crash. After the Flash Crash I think people realized that there's a lot of algo going on and there's a lot of high-frequency trading going on and if I don't have that as a big part of my business then I'm really at a disadvantage. That's a global, macro trend we are seeing.

If we shoot back to the region, everyone is looking for some type of advantage as to how they want to run their trading operation. And don't think of it as news-flow trading, think of it as moving on events. For the most part that region may be interested in some of the things you are starting to see or that have developed quietly, and by quietly I mean secretly, of people wanting to use sentiment and other things. What I'm seeing outside the US and what's coming to Asia are folks asking the basics of, ‘How do I get a feed of elementized news that has the data in it for numeric items? Can I get earnings that way? Can I get corporate actions?' They know that for those types of events, if you can enumerate them, they're triggers; they're catalysts in the flow of trading equities or other products.

Any other markets that you are looking at outside of Hong Kong?

That's something that we don't talk too much about because we don't want to tip our hand to our competitors. But Hong Kong is the first step and we have ideas about how we want to approach this and we have other places that we'd like to go within the region, but we'll enter them at different times. We clearly love the region and think it's growing and we want to expand our presence there.