Unstructured data will advance electronic trading beyond the need for speed, helping firms find new market opportunities and improving risk management.
Boston, MA, October 29, 2008 – A new report from Aite Group, LLC looks at the trading world's increasing use of unstructured data to augment structured data for improving algorithmic trading opportunities. The report is based on conversations with leading vendors, customers, and finance professionals who had been in the business of unstructured data and its usage in electronic trading, and aims to examine the options and growth potential of the market. It also profiles Dow Jones, Need to Know News and Thomson Reuters as vendors of unstructured data, and examines their offerings.
Electronic trading firms hoping to gain an edge in trading by pushing technology to achieve the lowest latency possible have relied heavily on historical and real-time market data to develop best execution strategies. While the messages associated with this activity have been doubling on an annual basis with no perceived end in sight, low-latency access to and application of this data can be cost prohibitive to all but the largest firms. To help combat this, firms are increasingly incorporating new sets of unstructured data into their trading strategies to either enhance or circumvent electronic trading's technology race. Unstructured data is information not traditionally read or interpreted by computers to make decisions, and includes news, SEC filings and Web content. This data is now receiving the necessary structure and/or context to be leveraged by algorithmic trading. Aite Group sees the implementation of unstructured data in trading strategies growing rapidly: Firms will spend US$75 million for unstructured content used in algorithmic trading in 2009, and Aite Group anticipates that this figure will grow to US$141 million in 2011.
"While few firms currently use unstructured data in their electronic trading strategies, Aite Group anticipates solid growth in this area, despite - or even because of - current market conditions," says Adam Honoré, senior analyst with Aite Group and author of this report. "Firms will be looking for any competitive advantage they can find, and unstructured data offers an untapped reservoir of new ideas waiting to be discovered."
This 32-page Impact Report contains 15 figures and three tables. Clients of Aite Group's Institutional Securities & Investments service can download the report.