Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Wednesday, December 13, 2006

The power of news…and automated trading

Now here’s an announcement to get most people going. Reuters issued a press release this week announcing products that “ will allow its news output to be "read" for the purposes of automated trading for the first time. Both are designed to enable computers to recognize and process key items of information in Reuters news stories, allowing customers to incorporate news into their automated trading strategies.”

This has huge implications for issuers of news, and for news disseminators. The basic idea is that Reuters will tag items of news with a code that allows a computer to make a ‘decision’ to sell or buy a stock, based on a combination of those tags.

So an investor might have set a range of conditions under he would always wish to sell a stock, and when the computer advises that a news story has been written that meets those conditions, the computer will initiate the sale.

There are a range of troubling things about this. Words have can have multiple meanings to which the computer would react. It adds a whole new dimension to the craft of writing a press release. How will the tagging place? Will it be done by Reuters, or will pre-processors such as the news disseminators, do it for companies?

On the other hand, it also presents opportunities; good news or a strong performance is MORE likely to influence the market than it does at the moment.

TM suspects there is much more on this to come, but it is worth watching.


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