Foreign exchange: RavenPack targets FX hedgies
Service enables trading on news; High-end product will eventually reach retail
|Armando Gonzalez, president and chief executive of RavenPack|
Technology company RavenPackhas launched a real-time macroeconomic and geopolitical news sentiment service designed to provide FX quantitative hedge funds with the tools to build trading strategies around stories in the world’s media. The service, which is built on technology originally intended for use in the counter-terrorism and security sector, sifts through thousands of unstructured news stories and turns that information into tradable data within milliseconds. The company believes the product – RavenPack News Analytics version 3.0 – will also attract interest from bank proprietary trading desks, FX market makers and eventually the retail sector.
"We’ve been analysing corporate news for a while now, and we built a technology that permits us to capture any news event that is published on any feed that passes through our engine," says Armando Gonzalez, president and chief executive of RavenPack. "We built a refinery. We have crude news coming in and we refine it and turn it into structured data products that go out to our clients."
RavenPack’s previous products were aimed at the equity sector – the company says the world’s top-five equity quantitative hedge funds are clients. The firm sifted through expected corporate news, and began to spin off into unscheduled news, such as layoffs or product recalls. That expanded into other news events that could move prices, such as natural disasters or acts of terrorism.
The company started off defining 100 events, which its algorithms could search for in news stories and analyse for their potential market impact. Its new product has expanded to a taxonomy of more than 1,200 macroeconomic, geopolitical and corporate events, which are systematically detected. The analysis is then delivered as a real-time data feed to customers.
That produces a time series of data, which goes back 12 years, that reflects news. RavenPack uses Dow Jones newswires, all editions of the Wall Street Journal, Barron’s and other global newswires as its sources. The company says its clients can then model the data as they see fit.
Gonzales says the product helps FX hedge funds sift through the "noise" of the news and helps them make better decisions. "They will be better informed, and rather than trying to figure out all the things that are going on out there, they can spend more time on their models," he says.
Gonzales concedes that at the moment it is a "high-end" product, but believes it will make it to the retail sector. The firm also believes, as well as potential alpha-seeking interest from proprietary trading desks at investment banks, the FX industry can also make use of the product as an early warning system, given its ability to track unexpected market-moving events at high speed.
That, the firm says, will make the product useful to FX market makers, who could incorporate it into their electronic platforms, enabling them to widen spreads or tilt one side of the bid or offer at the first sign of an unexpected event that has the potential to unsettle financial markets.