Complex Events Drive Trading Strategies

Terry Flanagan

Complex-event processing is being woven into trading strategies by incorporating machine-readable news and other data.

Exchanges are increasingly including such content within their market data products.

Deutsche Börse Market Data & Analytics, for example, collects, refines and disseminates capital market-relevant data. The product range includes price data, trading statistics, analyses, master data, financial news and approximately 8,600 indices that document what is happening on the international financial markets and make it transparent.

With its AlphaFlash Trader, Deutsche Börse has made machine-readable news accessible to a new client group, thereby enabling more traders to execute automated trades based on macroeconomic indicators.

CQG, a provider of market data, trussing, and analytics, has partnered with Deutsche Börse to provide automated, event-driven trade execution via the AlphaFlash Trader application. Through the CQG partnership, traders will be able to preconfigure orders, which will allow them to react faster and smarter to events, the companies said.

“We’re excited to make AlphaFlash Trader available to CQG’s trading customers. By using our application, they’ll be able to preconfigure orders to automatically enter into the markets at the release of an economic event”, said Georg Gross, head of front office data and services at Deutsche Börse Group. “This enables clients to react faster and smarter to unexpected outcomes of macroeconomic releases.”

Tomorrow’s traders are being educated in the nuances of machine-readable content.

OneMarketData, a provider of tick data management and analytics, has announced that the University of Illinois at Chicago’s (UIC) College of Business Administration has selected OneTick, a database for complex event processing (CEP) and tick data management, to support the school’s research in market microstructure and quantitative finance.

OneTick will be included in the school’s CME Group Foundation Market Training Lab, which offers a functional trading floor similar to that of a broker-dealer or a proprietary trading firm. The space employs workstations linked to financial databases enabling students to analyze data in the context of a trading environment.

As quantitative trading and analysis is increasingly used by sophisticated trading and investment firms, UIC has introduced specialized programs to provide its students with the tools they need to work in today’s financial markets. Through OneTick software, the data will be used in market simulators and ticking analytics.

Assistant Professor Nitish Sinha will use the software to teach a class on financial strategies and text analysis, which focuses on how financial markets interpret and react to information.

“Often the analysis involves matching market data with news data,” said Sinha. “A lot of pre-processing needs to be done before the market data gets transformed into a nice example and that can be overwhelming. OneTick automates the pre-processing and makes it easy to tweak various parameters. The software will be extremely useful in letting the students have a feel for market reaction to news events.”

OneTick will help the school apply theory to data to see how quotes respond to volatility, how market metrics change across time, and how trading dynamics change as the order book fills up.

“This combination of in-depth simulation theory and interaction capability is very unique,” said Dale Rosenthal, assistant professor of finance, who teaches market microstructure and electronic trading classes. “We spend a lot of time thinking about the theory of how prices are formed. For my commodities class, OneTick will help students understand how WTI crude oil, RBOB gasoline, and heating oil trade relative to one another and how that may affect risk management.”

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