Opening Cross: Is it Time for a Contrarian View, or Just a Second Opinion?

max-bowie
Max Bowie, editor, Inside Market Data

Be warned: There’s a nasty case of contrarian flu going around. Symptoms include frustration with traditional datasets, phobia of long-safe but now volatile asset classes, and an altered perception of reality, where things don’t behave as historical data suggests.

For example, in last month’s Fixed Income Webcast, the conversation took some unexpected turns. Just as participants in last month’s Latency special report talked less about outright speed and more about other differentiators for firms who can no longer compete in the latency race, speakers on the fixed income webcast also raised some points that seem to go against the report’s premise—such as the popularity of emerging market exchange-traded funds driving investors to underlying assets in the US, or traders moving assets into cash or commodities in times of volatility and uncertainty—or perhaps signal more interesting times ahead.

Traditionally a safe haven to park investments that you want to protect from fluctuations in the equity markets, recent credit events and concern over sovereign debt has changed the profile of the bond markets—in some cases making them less appealing to risk-averse investors, while at the same time putting off traders looking for risk with higher reward. And yet the crisis also created opportunities among undervalued municipal securities—some of which have taken on a role similar to high-yield securities, according to webcast participants.

As yet, there’s no known cure for this contrarian flu, though governments, economic agencies and regulators are all working on initiatives to alleviate the underlying causes. But in the meantime, sufferers are being advised to bundle up (their data contracts) and feed the fever with a diet rich in fresh content and plenty of liquidity. Sufferers are also encouraged to mix treatments: one thing to emerge from the Fixed Income Webcast is the idea that how firms correlate different sources and types of data may be more valuable than the individual datasets themselves.

For example, Lime Brokerage is incorporating low-latency event data from Selerity into its client offering, to give traders an additional source of information for trading strategies that may be sensitive to news events. Meanwhile, RepRisk has added new topic areas to its database of environmental, social and governance risk information, reflecting the impact of reputational issues on share price. Similarly last week, St. Louis-based BAM Advisor Services integrated DPC Data’s MuniPoints municipal bond disclosures data and MuniGuard service of relevant credit-related news into its operations, to support registered investment advisors with additional content. And Miami-based broker Tradewire Securities is using Titan Trading Analytics’ TickAnalyst signals based on historical analysis of behavioral research to provide intraday and swing trading recommendations for exchange-traded funds and US equities.

Apply a concoction of all of the above, and you’ll be back to peak performance in no time. Of course, you may well feel overwhelmed by all these additional data sources—not to mention the task of validating the value and reliability of some of them for your strategies—but that’s another ailment altogether.

Finally, showing no signs of being under the weather is SIX Telekurs, which celebrated 25 years of operations in North America last week with the promise of greater things to come under its new moniker SIX Financial Information. I can’t think of a nicer bunch to party with, and we look forward to covering their next 25 years.

And since we’re in a party mood, with summer just around the corner, let’s slather on some SunGard, mix a Selerity-Lime cocktail and head for the ASX’s backup datacenter at Bondi. And in the event of a post-Telekurs hangover or a nasty outbreak of ITCH feeds, take a couple of ADVA. After that, if you think your symptoms might be a case of contrarian flu, I advise getting a second opinion.

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