In yet another example of just what a farce our market has become, it appears that HFT algos, no longer able to freely frontrun the market courtesy of counter HFT-measures offered by major banks and an SEC which has started sniffing around illegal HFT activity, have stooped to the second-lowest rung in the ladder: scouring through momo trader tweets on Twitter, particularly those from the StockTwits network and somehow converting that into actionable "intelligence." Because while until now some amusing attempts at money management using the garbled noise of Twitter had been implemented, all of them relied on human eyes to translate content, going forward it will be robots doing the actual analysis, not to mention sarcasm translation. STM reports: "A Boulder, Colo., collector and redistributor of comment expressed on social media networks Thursday will launch a pair of streams of data from Twitter and the securities discussion site StockTwits that are 'normalized' and ready to be fed to computers for analytical processing. Gnip said it has prepared the streams as part of the launch of a product it calls MarketStream, that is designed for use by hedge funds and high-frequency traders. The move follows the launch in May of a social-media-based hedge fund in London. In that launch, Derwent Capital Markets said the fund it created would try to achieve consistent above-market returns from real-time analysis of comments on social data." Well actually if they really want above market returns they should also add Yahoo Finance message boads to StockTwits: that will really put the bind on Steve Cohen to come up with new and improved ways to generate information arbitrage. At that point the entire momo crowd in the whole world will be swaying the market like an explosive-laden boat full of news reactive lemmings, who believe they move the market, only to receive terminal margin calls within days. But, yes, the safety of the crowd is soooo nice.... Until it isn't. As for the algos, we can bet what side of the trade they will be vis-a-vis the prudent investor subsegment that chases market heatmaps in a market in which VIX 30 is the new normal.
More on this latest attempt by vacuum tubes to scrape the proverbial bottom of the barrel:
In the Gnip case, the streams of tweets have been turned into data in a uniform or 'normalized' format that hedge funds or firms of any type that rely on automated processes for making high-speed trading decisions. And those streams are intended for use along with other statistical and news-based sources of market data.
The launch Thursday is being made in conjunction with StockTwits, a Web site and service whose users comment solely on capital markets events and individual stocks.
Initially, MarketStream will actually provide two streams of normalized data: One that relays comment from Twitter, the progenitor of the concept of a single user broadcasting 140-character messages to the web at large, and StockTwits, which created the $(TICKER SYMBOL) tag that lets tweeters identify exactly which stock a message is talking about. Such tags allow users and computing systems to quickly pick up content relevant to a single stock such as KO (Coca Cola Company).
And the punchline:
The combination of the "broad" feed from Twitter and "specific" feed from StockTwits will translate the "voice of the market,'' in McGuire's term, into "workable data" for algorithmically-driven trading systems.
Well, as long as it does not translate into a "picture of the market."
Nor, of course, of the abovementioned companies IPO chances...