Opening Cross: Why Did the Chicken Cross the Road?

Max Bowie, editor, Inside Market Data

To trade on the other side, of course. No, I’m not giving up my day job. It’s not funny, but it is increasingly true—at least, if you substitute “traders” for “chicken” and “the world” for “the road,” because in this instance, the “other side” could mean the other side of the Hudson River (which separates ECN-turned-exchange Direct Edge from larger rival the New York Stock Exchange) or the other side of the world as traders increasingly look at emerging markets to deliver better returns.

But here’s why I bring up chickens: the chicken-egg debate. Which came first? A certain amount of chicken-egg debating always goes on before entering any new market: Is there sufficient demand? Is the market mature enough? Is it fast enough? Is it too fast, with no opportunities left to exploit? Is sufficient data available to support trading? And if not, how can we get the data? Over the years, a major barrier to trading in far-off regions was that collecting data on the market was a major undertaking. Firms wouldn’t trade without data, and vendors wouldn’t make the investment to add the data without demand from firms.

Over time, as international players expanded their coverage worldwide, including beyond the main market centers in a region to secondary markets—in part driven by firms wanting to exploit new regions and asset classes, a trend exacerbated by the financial crisis hitting Western economies much harder than their emerging counterparts in Asia and beyond, which thrived as established economies lost much of their luster—that tipping point moved, data became more easily accessible, and the egg dared the chicken to cross the road and compete on its home turf.

You can find a discussion of some of the ways that emerging markets are bringing their data to a wider audience through alliances and adoption of international standards elsewhere in this week’s issue, in the first of a series of longer, analysis pieces—the first of which covers this topic.

And now that these markets have broken out of their shell, they are looking for the chicken to bring some of its own data and tools across the road with it. For example, John Waanders, global head of Bloomberg Anywhere mobile, says the vendor was seeing particular demand from emerging market economies for its Bloomberg Anywhere app to be available on Android smartphones and tablets. This is hardly surprising, since Gartner last year predicted that Android devices will ship over a billion units and command almost half the smartphone market by 2015. And much of this demand appears to be coming from Asia, and China in particular, where Android is outstripping rivals.

Of course, Bloomberg isn’t the only vendor recognizing the need to respond to demand from Asian markets: Thomson Reuters has built a version of its Eikon desktop specifically for traders in China, with market-specific data, news, commentary and company data, Chinese-language content and displays, and an interface designed to support the different ways that Chinese-language text is displayed and read.

This is also one of the reasons for NYSE Technologies' alliance with on-demand data provider Xignite: to be able to provide its data to regions that don't have the infrastructure and connectivity to handle high-bandwidth direct exchange datafeeds, for website and mobile application developers.

Meanwhile, traders who want to expand not geographically but into non-listed markets, have faced similar challenges around obtaining data—almost impossible to find in less transparent markets overseas, and sometimes equally difficult to obtain in their home markets—on private companies. To address this—at least in the US—company data provider Edgar Online has allied with over-the-counter equities market OTC Markets to provide data on unlisted private companies and ADRs, to make it easier for traders to locate information on private companies and increase transparency and liquidity in the OTC marketplace.

So as all these datasets become more readily available, the strategies available to traders are becoming wider and more flexible, and they no longer have to choose between the chicken and egg of which strategy to implement, but can create their own scramble, and have it as liquid as they want.

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