Opening Cross: Reaping the Data Whirlwind

As Hurricane Irene menacingly crept northwards to New York, exchanges assured members and clients that they planned to open last Monday, despite whatever wrath Irene may wreak, and would have plans in place to cope with any damage to their datacenters. The Chicago Board Options Exchange - well out of Irene's path - warned that its own plans would depend on any disruption to trading on underlying east coast markets.

As it turns out, New York City was spared the worst of the storm, though CBOE last week reported another kind of turbulence. According to the exchange, August was the most active month in its history, while the VIX Index - aka the "Fear Index" - also recorded a historic high, with 1.8 million VIX futures contracts traded in the month.

And we're not out of the woods yet: After peak message rates early in August, marketdatapeaks.com - the portal operated by Exegy, Essex Radez and the Financial Information Forum - reported a new peak for market data messages of 5.43 million messages per second on Aug. 25, compared to the previous peak of 5.25 million mps set on Aug. 4 during the height of the volatility early last month.

And just as the hurricane sent people along the east coast of the US running for cover, the ongoing storm in the financial markets is driving investors to seek out a safe haven for their trading.

Supposedly the turbulent markets are even prompting some to reconsider real estate as a higher-earning investment - or at least as "a safe place to park capital" in light of record low mortgage rates, despite low purchasing activity, according to real estate data provider Hanley Wood Market Intelligence. Meanwhile, the National Association of Real Estate Investment Trusts reported that returns from real estate investment trusts were double those of equities markets, with the FTSE NAREIT All Equity REITs Index rising 11.79 percent over the first seven months of 2011, compared to a 3.87 percent gain for the S&P 500 index.

If true, I would expect to see increased focus on real estate investment trusts and fundamental industry data such as that provided by XTF or REIDIN as investors - whether institutional or retail - exercise similar due caution as they would when entering a building site, having hopefully learned from real estate-related credit snafus that precipitated the economic crisis. But ironically, this lingering impact of a real estate/credit-driven crisis may in fact spark interest in rental real estate investments, according to Hanley Wood, since consumers soured by the experience of home ownership in a recession, negative equity and repossession will now be flooding the rental market - though another type of flooding, such as that resulting from Irene, could impact this particular market either way.

Real estate is just one (extreme) example: Traders and investors are looking for safe investments as well as more exotic trading opportunities. For example, growing participation and liquidity on Quadriserv's AQS securities lending platform - which is now seeing enough interest beyond its core client base of active participants to launch a standalone datafeed - shows that traders are paying more attention to this market as a way to make more money from their investments by lending their holdings, and as an indicator of activity in other, related markets. Meanwhile, Barchart's purchase of Stockgroup's data hosting business exposes it to a new base in Canada with the opportunity to expand its services as investors seek data on more asset classes.

This all leads me to believe that providers of niche datasets and sophisticated pricing tools - such as CMA, which is expanding its OTC valuations service to provide more flexible pricing, or energy supply data vendor Genscape, which has named former Thomson Reuters exec and strategy guru Matthew Burkley as chief executive - will be much in demand. Now, it will be up to them to reap the whirlwind before the opportunity blows itself out.