As price information becomes more commoditized and investors look for more sophisticated ways of utilizing and correlating market data with other content to develop new trading strategies, tools that provide deeper and more complex analysis of data are becoming increasingly valuable.
This demand can be seen affecting data and technology vendors in several ways. Some are snapping up analytics providers, while others are adding such tools to their existing offerings, though the trend is also creating opportunities for new players to get in on the act.
In the acquisition category, Thomson Reuters last week bought Austin, TX-based data, news and analysis vendor Highline Financial for an undisclosed sum, and will make Highline's database of public company and regulatory information - which includes 24,000 filed and calculated financial data points updated daily and 20 years' worth of historical data on 20,000 financial institutions - available via its Eikon next-generation desktop workstation next year.
Other vendors not looking to directly acquire content or tools are nevertheless incorporating more sophisticated analysis into their existing technologies. For example, New York-based execution management system vendor TradingScreen is integrating OneMarketData's OneTick complex event processing engine and tick database to drive a suite of analytical services within its platform, which officials say will allow users to run more than 100 pre-set analytics against real-time and historical data queries for fast analysis of data and quantitative strategies.
Underlying these analysis platforms is the content itself: often, they require detailed tick-by-tick historical data, where end-of-day prices once sufficed. Hence, exchanges are now placing more emphasis on this content: Nasdaq OMX last week launched a historical version of its PHLX Options Trade Outline product, which provides detailed historical trade data - including trade type, size and volume - from its PHLX market, while CME Group is stepping up activity around its DataMine historical data product, hiring Matt Frego as sales manager.
But it's not just niche specialists and exchange stalwarts that will drive this area forwards. Technology giant EMC, which acquired the Greenplum database this summer, is making a play to target front-office functions in financial services firms, exploiting the need for solutions that can quickly store, process and retrieve large amounts of data to support strategy-building, to adapt algorithmic trading strategies in real time, and to perform true real-time risk management.
Another new player eyeing this space is business intelligence software provider InetSoft, which has hired Rajiv Bala Subramanian - formerly one of the management team at real-time systems and latency monitoring software vendor ITRS - as chief strategy officer, to push into the front office, using the vendor's existing core platform to harness information and create meaningful results, such as how stress from data volumes on specific FIX engines might affect a firm's unfilled order rate.
Fellow former ITRS exec Joanne Kinsella, who has joined Sumerian as Americas managing director, is taking a similar approach, to bring the vendor's products to potential clients among trading venues, investment banks and hedge funds who see value in having greater insight into the performance of - and potential impact of new initiatives on - components of their technology infrastructure, which Sumerian provides by capturing existing data from a firm without disrupting its existing business processes, analyzing it, and presenting reports either in PowerPoint presentations or via an online portal.
Simply put, the more complex the analysis, the greater chance of generating alpha through a strategy that no one else has. And for that, you need more sophisticated data and increasingly complex tools.
Victor Anderson, who is in town from London, joins Anthony and James to dig into the key themes from Waters USA.Subscribe to Weekly Wrap emails
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