Back on July 27th 2006, Toomre Capital Markets LLC ("TCM") highlighted Reuters' pursuit of "machine readable news" for algorithmic trading applications. Reuters eventually released two products in December 2006 aimed at the direct feed of economic statistics and company earnings information into quantitative algorithms. On March 6th 2007, according to this story on Finextra.com, Dow Jones has now followed suit and announced the release of their new Elementized News Feed.

Dow Jones is looking to cash in on the rising popularity of algorithmic trading with the launch of a data feed that delivers news items in XML format which can be rapidly processed by electronic trading programs.

Dow Jones says its new Elementized News Feed delivers data directly to quantitative-analysis models and automated trading programs and is designed for both buy and sell side firms involved in algorithmic trading, quantitative analysis and execution management.

The ultra-low-latency service delivers economic and corporate news in precise and discrete elements in XML-tagged fields. This eliminates the need to parse unstructured text, allowing trading models and computer programs to process, interpret and take action on breaking news in milliseconds.

Dennis Cahill, SVP and chief product officer, Dow Jones Enterprise Media Group, says the new feed "revolutionises how news can be analysed and acted upon by market participants, while giving our clients the best possible news input for their proprietary models".

Cahill says the feed enables proprietary traders, hedge funds and quantitative analysts "to make trading, investing and hedging decisions with minimum latency and maximum security".

The feed provides data elements for all key economic indicators from major countries and will cover public firms in the US and UK. The service also includes an archive of more than three years of 'elementised' news for back-testing and statistical analysis of news flow and historical market reactions.

Toomre Capital Markets LLC is intrigued by the release of this new XML-based news feed and those available from Reuters. Assuming that the information is reliably encoded, these feeds should enable the creation of additional sophisticated trading and risk management algorithms.

Consider for a moment what currently occurs with the monthly release of U.S. employment data. The financial markets pause that first Friday morning of each month to digest the various statistics that are released at 8:30 AM ET and then trading activity often picks up a frantic pace based upon whether the economy is perceived to be stronger or weaker than expected.

By having such employment data fed directly into a quantitative algorithm, the computers can more rapidly than humans make decisions about what, if anything, should be bought or sold at which trading venue. Alternatively, the quantitative algorithms might raise a flag (or technically 'create an event') indicating that the employment data is out of some pre-determined norm and all electronic trading instructions should be stopped until there is human intervention.

These new digitized data feeds from Dow Jones and Reuters should further enable Complex Event Processing

("CEP

") and Event Driven Architecture ("EDA") applications. Key issues in such an automated electronic trading world will be making sure that low frequency data is accurate [i.e. +150,000 gain in non-farm payrolls is not interpreted as 150k or even 150 (with 000 assumed)] and enabling the quantitative analysts to rapidly and easily modify the various algorithms that are processed against the streaming data.

Toomre Capital Markets LLC works closely with StreamBase Systems because of the robustness of their enterprise-class solution in Complex Event Processing

("CEP

") space. Please contact TCM via the contact information at the bottom of this page if you would like more information on how we can help your organization implement robust electronic trading solutions that use CEP

and electronic data feeds like Dow Jones news or RSS data files. Reader comments and thoughts are welcome.