Good news or bad? Automatic trader decides
KAI RYSSDAL: There’s word today Reuters is taking its core product, providing the news, and turning it into an investing tool. The company’s rolling out a software system aimed at institutional investors like mutual funds. It’ll scan Reuters articles for positive or negative words about a company, give the article an overall score, zap it to the client, and within milliseconds that information can automatically trigger a trade.
Ashley Milne-Tyte reports.
ASHLEY MILNE-TYTE: One way that computer-triggered trading already works is this: The computer kicks in with a buy or sell order if a stock slips out of a prespecified price range.
Reuters’ Richard Brown says their new computer program lets clients’ trading systems automatically react to scores given to various articles.
RICHARD BROWN: You can actually generate a buy and sell order if it reaches a certain level of positivity or negativity.
But analyst David Easthope of consultancy firm Celent says there are potential pitfalls.
DAVID EASTHOPE: I think the danger with this system is that you have a system that quantifies very precisely but inaccurately, because there is something that isn’t being quantitatively analyzed — and that is sort of the sentiment that resides outside anything that’s visible.
The sentiment about a company that resides inside an analyst’s head, for instance. Still, Easthope says, Reuters is in the right place at the right time. Computer-triggered trading is becoming an increasingly large part of the trading landscape.
In New York, I’m Ashley Milne-Tyte for Marketplace.
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