Analytics special report

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Analyzing Analytics

Analytics-the tools that help traders and investment professionals to identify opportunities and spot trends in raw data, spanning the gambit from basic price and volume charts to technical analysis that can spot and predict trends, to behavioural research engines, and even systems for creating market derived prices-are in a state of constant evolution. And as data volumes increase, markets become commoditized and strategies become more sophisticated, analytics are becoming ever-more important in the search for alpha.

"The fixed income markets are becoming smarter.... The corporate bond and CDS markets have been the first to evolve to embrace pre-trade transparency, but it won't be long until we see this in other asset classes," says Tim Grant, managing director at Benchmark Solutions. "Clients are starting to demand the types of value-added analytics that have been more prevalent in equity markets, such as liquidity metrics, transaction cost analysis and quantifications of market impact."

This trend is also being reflected in how clients operate, with fundamental and technical traders increasingly sharing common ground. "In the past, we had two camps-quantitative analysts and technical analysts. [Now] these two approaches are meeting in the middle, and a new class of ‘quantamental' strategies are emerging," as quants seek more data to differentiate their strategies and as fundamental analysts use quantitative processes to advance their screening processes, says Rich Brown, head of quantitative and event-driven solutions at Thomson Reuters.

Some attribute this to the availability of data, and the tools by which a broader audience can access it: "More and more, we see the emergence of a trading style that is composite or hybrid in nature. This is in part possible because of the commoditization of data that has occurred as a result of the prevalence of the web," says John Shortt, vice president of research and development at technical analysis software vendor Recognia.

But in addition to being a delivery channel, the web is also a rich source of information, and financial firms are seeking out market-moving information being made public through blogs, Twitter feeds and other forms of social media-which together present far more updates per second than any market data feed, and will drive the evolution of Big Data storage tools and the next generation of analytics.

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