Opening Cross: News Isn’t Extinct, It’s Just Evolving

“Reports of my death have been greatly exaggerated,” insists the news industry. In last week’s issue, we broke the story of Alliance News, a new newswire service focusing on the UK market, which the vendor believes has become under-served by news providers. This week, we report on another newswire launching a new service intended to provide specialist news and commentary for FX traders.

News has gotten a bad rap in recent years, with some questioning why they would pay for something they can find using Google—disregarding the fact that you may still have to pay to access that news—while others find more value in analysis of events than in the breaking news itself, where consumers want to be told not just what happened, but how it will impact them. Analysis and opinions in this instance doesn’t mean the partisan “reporting” you might see on TV, but independent, informed commentary from people who have been around the industry longer than many traders.

More recently, it emerged that Thomson Reuters had been releasing news of the University of Michigan’s consumer sentiment survey early to high-frequency traders before the rest of its clients.

In this instance, news is distilled into key numerical values that can be compared to pre-set assumptions of what those values will be, so an algorithmic trading system can place trades accordingly. In some cases, firms are taking this to the next step, incorporating sentiment analysis to determine how much news will impact price movements.

In other cases, firms are reluctant to implement sentiment or Big Data analytics—as evidenced by a panel discussion at last week’s Buy-Side Technology North American Summit, where executives balked at the idea of using Big Data to perform Google-style analytics, saying asset managers need more rigorous data management in place before implementing Big Data strategies.

While commentary services are aimed at human traders with the need for and ability to understand an interpretation of an event, machine-readable news relies on services that translate news into digital “events” or signals, such as Selerity, which takes information on unstructured events such as company financial results or the results of drug trials, and translates them into structured values to be incorporated into automated trading strategies.

In addition, the kind of digital “events” that firms want to monitor aren’t limited to macroeconomic announcements or company earnings. In some ways, events relating to the infrastructures and networks that carry the signals can be more critical  to the effectiveness of modern trading strategies where every microsecond counts. Hence systems monitoring platforms are rising in prominence, with vendors such as Corvil expanding and adapting platforms originally developed for monitoring specific elements of overall technical performance to monitor other features and functions in real time. For example, Corvil will this week announce a raft of deals for its risk and compliance monitoring service, which is based on its original CorvilNet latency monitoring platform.

“The problem that many firms were encountering is that while they have risk monitoring and compliance management systems in place, they were designed, built and architected for a bygone age—largely for the paradigm of floor-based trading, whereas now most trading is machine-based. The big challenge is that these systems were not designed to detect the type of events and anomalies that are now happening and causing problems,” Corvil chief executive Donal Byrne tells IMD reporter Faye Kilburn.

The Knight Capital debacle and the Flash Crash are two high-profile instances of this, but not the only ones. Hence, “news” about your systems’ trading performance can be as important as the news that prompts the trade in the first place, as, in each case, is understanding the impact of that “news” as the concept of what it includes continues to evolve.