Machine-readable news is a hot topic in financial services and has been for a while. Take a closer look at industry practice, however, and it’s easy to see that most algorithmic traders (“algo” traders) are still missing a trick. Since generating alpha depends on running distinctive trading strategies-and being the first mover-capitalizing on new data sources is a key success factor for algo traders. As a result, machine-readable news feeds offer immense alpha generation opportunities.
One such machine-readable news feed is AlphaFlash from Deutsche Börse. AlphaFlash delivers more than 300 global macroeconomic indicators, treasury auction results, Fitch ratings and unscheduled corporate news for easy, direct integration into trading algorithms. It focuses on what’s most important to event-driven algo traders: market-moving content and high-speed delivery.
Market-moving Data, as It Happens
As machine-readable news has evolved, so have user expectations regarding content and functionality. Most event-driven traders currently trade on headline market-moving events such as U.S. employment numbers, housing statistics, interest rate decisions and the latest GDP figures, but they’re constantly looking for new alpha opportunities. In order to stay relevant, Deutsche Börse regularly enriches its AlphaFlash feed, recently entering the unscheduled events arena by adding two new data packages: German corporate news and Fitch ratings.
AlphaFlash’s corporate news feed covers roughly 100 of the most important German companies. Companies listed in Germany are required to immediately disclose any information that may impact share price, and these so-called “ad hoc” disclosures typically report when a company’s profit expectations have changed or when dividend announcements are made. Up to 10 seconds can go by between publication of an ad-hoc disclosure and market reaction-it’s the time human traders need to analyze the news and make trading decisions. With AlphaFlash, an algo application can process ad hoc releases and execute orders in the first second following publication.
Introduced last year, AlphaFlash’s Fitch ratings feed provides the fastest, and only, access to machine-readable Fitch ratings. The Eurozone debt crisis has brought creditworthiness to the forefront of traders’ attention, and they can now use Fitch ratings in their risk management tools to automatically unwind positions that may be exposed when an outlook or rating deteriorates.
U.S. Economic Data: Giving Traders the Edge
Although adding new and enriched data types to a machine-readable news feed provides value, traders increasingly need private data points to gain a competitive edge. One example of this is the Chicago Business Barometer, which reports on U.S. economic activity. Many traders watch the barometer closely because it’s widely seen as an advance indicator of the Purchasing Managers Index (PMI) numbers released by the Institute for Supply Management (ISM) the following day. Deutsche Börse acquired the Chicago PMI in 2011, and it’s now available to AlphaFlash subscribers three minutes before it goes into general release.
Minimum Latency, Maximum Opportunity
When it comes to time-sensitive data such as news events, there’s always a need to deliver the feed as close as possible to an exchange’s matching engine in order to minimize latency and maximize opportunity. In line with this need, Deutsche Börse continuously extends the deployment of the AlphaFlash feed to new venues. Direct connectivity to AlphaFlash is available in data centers across the globe, including Equinix’s CH2 IBX® (Chicago), Equinix’s FR2 IBX (Frankfurt), Equinix’s London-Slough campus, Equinix’s NY2 IBX (New York metro area) and Equinix in Sydney. Cross-connects within these strategic data centers allow mutual clients of Deutsche Börse and Equinix to streamline their infrastructure and optimize alpha generation.
For more information, please visit www.deutsche-boerse.com.
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