Feeding the Machine (News)
Dow Jones Elementized News Feed adds company data
November 19, 2007
A recent enhancement of the public company data available on the Dow Jones Elementized News Feed has furthered a growing trend: Computers are reading press releases, news and government reports, highlighting what's important, and passing it on to algorithmic trading models.
That's not to say that the automation of the trading function is making humans obsolete. "During development of the new Dow Jones feed, I asked traders how much they rely on automation--do they go to lunch and just let the computers keep running, choosing stocks to buy and sell?--and they replied, No way,'" said Robert Prinsky, executive director and senior editor of institutional product development for Dow Jones' enterprise media group. "The algorithms or computers could blow up. It's a balancing act and requires automation coupled with human interaction. Besides, humans are involved because we can't elementize everything."
The Dow Jones Elementized News Feed, introduced in March, can now tag moves such as executive changes, bankruptcies, stock splits and restatements by more than 5,000 U.S. companies. The New York-based company will soon add data from 1,000 Canadian companies trading on the Toronto Stock Exchange, and by year-end equities on the Stoxx 600 index in Europe will be part of the feed. More economic-indicator data from the G7 and eurozone nations has been added.
The news feed is integrated with quantitative models and trading programs, tagging keywords and symbols. "The Elementized News Feed has a parser to put identification tags around all the info that's worth extracting," explained Prinsky. "Say the earnings-per-share price of a firm is expected to be 50 cents, and your algorithm is set up so if it comes in at 55 you buy a little, if 60, buy a little more. But the release says next quarter the price is expected to slip to 30 cents. Then you don't want to buy, maybe you want to sell. We can yellow flag' profit warnings."
Reuters Group has two machine-readable information products (NewsScope Real-time and NewScope Archive) and Thomson Financial has built an algorithm that tags the news--its low-latency data feed and archive is slated to be commercially available by the second quarter of 2008. "We have six beta clients, a select group of hedge funds and banks who we've been working with since February 2007," noted Matthew Burkley, president of enterprise solutions at Thomson Financial.
News archives are used to back-test algorithmic strategies against past events, letting portfolio managers screen ideas and trading strategies before programming them into their systems. "We want our archive to be comprehensive and work with other news organizations, combining news providers and offering access to their archive," Burkley said. "We've always believed in open systems."
Dow Jones is pursuing another route. "We're not looking for news partners--we're busy with our own news, continuously expanding by adding more categories, countries," said Prinsky. But while aggregating other companies' data may not be in the works, it is pursuing additional distribution channels.
Event Processing
In June, Progress Software Corp.'s Apama division integrated its systems with the Dow Jones Elementized News Feed. "Proprietary traders at hedge funds, banks and other financial institutions buy Apama to aid in writing their own algorithmic models," explained Brad Bailey, senior analyst at Boston-based Aite Group. "They can use the news feed's information to help in the trading of stocks and other asset classes."
