Opening Cross: The Intellectual Challenges of TA, IP and M&A
Whether an asset class is commoditized or not, analytics are an important tool in determining an instrument’s true value beyond its price alone, as well as what direction the market expects it to move—as demonstrated by the swathe of stories in this week’s Scrolling News section. These can range from relatively basic tools to increasingly sophisticated technical analysis tools, or convoluted indicators with buy/sell signals and how long you should hold an instrument.
Using the term loosely, one might argue that indexes are the original analytic—something that creates a composite value for a basket of securities—and one that is evolving apace, creating ever-more sophisticated methodologies to account for specific needs. Whereas Tick Data Corp. is expanding its historical tick data in Latin America and Asia to support high-frequency traders looking to enter these regions, the traditional way to gain exposure to a region or asset class is through indexes designed to represent a country, or i aspects of a country combined with other specifics to create an investment vehicle tailored to particular niches.
For example, indexes can be used to reflect market stability, such as Moody’s Investor Services’ Asian Liquidity Stress Index, which represents speculative-grade liquidity. Or, they can be used to create low-volatility, risk-optimized portfolios, such as the Stoxx+ Minimum Variance Index family, which the index provider launched last week in partnership with Axioma, a provider of risk and portfolio analysis tools. Firms can then use these as indicators, create portfolios that track the components, or invest in tradable assets based on indexes, such as exchange-traded funds or futures.
As indexes and associated products become more sophisticated, their creators understandably place a high value on the methodologies behind their construction. Hence the Chicago Board Options Exchange—which last week lost an appeal brought by the International Securities Exchange in a patent infringement dispute over electronic derivatives trading—recently asked a Chicago court to enforce an injunction prohibiting ISE from listing and trading options on the ISE Max SPY index, which CBOE and index partner Standard & Poor’s Indexes allege are basically S&P 500 options.
In fact, patents aren’t just driving lawsuits, but are also driving merger and acquisition activity. At Bloomberg’s Enterprise Technology Summit in New York last week, David Berten, founder and partner of Global IP Law Group, said that as companies seek to exploit new business areas and diversify revenues, they find themselves entering markets already protected by a minefield of patents, and suggested that companies seeking to enter a market via acquisition should ensure any purchase has a diverse array of patents to protect its intellectual property. This becomes especially important when—as noted on the same panel by Elias Mendoza, partner at Union Square Advisors—M&A activity is expected to be driven by larger players seeking to fill gaps in their offerings via strategic acquisitions.
In one example of this, Nordic vendor Marketmind last week acquired neighbor Stock Point with the two-fold aim of increasing the operating systems it supports—including for mobile platforms—and to target larger banks and brokerages. The real challenge for companies seeking an acquisition fix will be to leverage their purchases without allowing the integration to distract from the continued evolution of their own products, and ultimately combining them into a common platform, just as Nasdaq OMX has migrated the former Philadelphia Board of Trade trading and data platforms to its central Carteret datacenter, or how Markit has leveraged last year’s acquisition of Quantitative Services Group to expand its credit derivatives analytics with predictive factors based on equity and options markets—an important evolution to provide added insight over and above commoditized forms of analytics.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Data Management
Hub to lay off 20% of staff, sources say
Hub’s CEO says this is simply a case of a startup trying to stay nimble and efficient; others say it points to deeper issues.
TS Imagine integrates LTX’s pre-trade analytics tool
Users of the fixed-income EMS will now have access to LTX’s Liquidity Cloud tool, which provides a pre-trade score for the likelihood of trading success.
After contentious Opra upgrades, vendors brace for a faster future
Upgrades to the datafeed widely used to gauge the current market price for options contracts went into effect in February after three separate delays, which market participants say were caused by persistent bandwidth issues at some important recipients.
The IMD Wrap: No more turf wars, or why CDOs should heed the Voice of the CTO
Max reviews how our recent Voice of the CTO series has implications for those beyond a firm’s technology function, and how communication and collaboration between tech, data, and leadership will deliver better results.
Dark horse: Deutsche Börse building dark pool
New functionality allowing exchange members to execute sweep trades comes hot on the heels of European rival Euronext launching its own dark pool.
Man Group’s proprietary data platform is a timesaver for quants
The investment firm’s head of data delves into its alt data strategy and use of AI tools to boost quant efficiency.
Waters Wrap: The tough climb for startups
Anthony speaks with two seasoned technologists to better understand why startups have such a tough time getting banks and asset managers to sign on the dotted line.
As crypto ETFs become reality, benchmark providers take center stage
The SEC’s approval of the first spot bitcoin ETFs will expose a growing number of traditional market participants to the maturing world of crypto data, a moment that some—such as CF Benchmarks, BlackRock’s benchmark provider—have been eagerly awaiting.
Most read
- Women in Technology & Data Awards 2024: All the winners and why they won
- Witad Awards 2024: Above and beyond award (vendor)—Susan Bennett, Tradeweb
- Fighting FAIRR: Inside the bill aiming to keep AI and algos honest