With hedge funds and proprietary trading firms doing more algorithmic trading, media companies are turning their news feeds into machine-readable formats to feed into electronic trading platforms.
This week Dow Jones & Company announced a global agreement with Progress Apama to supply the Dow Jones Elementized News Feed into the Progress Apama Algorithmic Trading Platform.This ultra-low latency feed from the Dow Jones News Wires puts discrete news elements - including economic data, corporate events, timestamps, ticker symbols and metadata ¬- into XML-tagged fields for access by the Apama application.
According to Robert Prinsky, executive director and senior editor institutional product development at Dow Jones & Company, customers are actually trading off the news. Hedge funds, major banks and securities firms as well as financial institutions are among the types of customers that are interested in feeding the news feeds into automated trading programs, says Prinsky. However because the business is so secretive, Dow Jones cannot disclose any customers and it has signed non-disclosure agreements with all of its potential customers.
While customers are able to buy the elementized news feed directly from Dow Jones, some buy and sell-side firms prefer to work with the feed through a platform, says Prinsky. "There's another group of customers that want to work on platforms, they want to marry it with prices and algorithms," he says.
This is the first partnership that Dow Jones has struck for the elementized news feed product, released in March. Firms that use the Progress Apama platform for building algorithmic trading strategies can now analyze and respond to complex market events and news within the Progress Apama platform, according to the release. "It's exactly like we offer our textual newswires, you can get the Dow Jones News Wire directly on your computer or through any number of vendor systems," he explains.
"Apama has a lot of customers involved in algorithmic trading so it's natural to partner with them and offer the feed through their mechanisms," says Prinsky. According to the release, there will be a custom Dow Jones news adapter on the Apama platform. The package will include a set of Apama SmartBlocks products, which will allow institutions to build, test and deploy algorithmic trading strategies that analyze and react to news that has an immediate impact on the prices of equities, derivatives, foreign exchange and fixed income instruments.
Dow Jones launched the elementized real-time news feed in March of this year as a new way to deliver news for quantitative analysis models and automated trading programs. "Putting tags around it makes it by definition machine readable and machine executable," explains Prinsky. For example, if the tag tells the computer that the consumer price index is up one percent, the computer knows what to do with the information. Whereas if the headline is in text format, "the computer has to parse it to figure out which is the number and could make a mistake," says Prinsky. The idea behind elementizing the feed is that it's reliable and easier to process than trying to process free text by computer, he says.
In 2006, Dow Jones introduced Dow Jones Archive, which goes back 20 years. Some firms would use the Archive to back test their algorithms. But some would not. "It depends on what they are doing," says Prinsky. "If they are a high frequency trader they may not need the back testing," he says. Dow Jones is also producing an elementized archive with selective information that will be available in the same format as the elementized news feed.
However, Dow Jones is not the only media company noticing that computers are programmed to make trading decisions. Reuters also has come out with news feeds (Reuters NewsScoope Archive and Reuters NewsScope Real-Time) for delivery into algorithmic trading. "As far as we know, we are ahead of the pack. Our product is more advanced," says Prinsky. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio