A SAMPLE of Major Economic Indicators
Consumer Price Index
Employment Cost Index
Producer Price Index
Productivity and Costs
U.S. Import and Export Prices
Employment & Unemployment
Where Do You Put Your Servers? Important Geographic Locations for algorithmic trading Strategies
The majority of investors that trade the news seek to have their algorithmic trading platforms hosted as close as possible to news source and the execution venue as possible. General distribution locations for low latency news feed providers include globally: New York, Washington DC, Chicago and London.
The ideal locations to place your servers are in well-connected datacenters that allow you to directly connect your network or servers to the actually news feed source and execution venue. There must be a balance of distance and latency between both. You need to be close enough to the news in order to act upon the releases however, close enough to the broker or exchange to get your order in ahead of the masses looking for the best fill.
Low Latency News Feed Providers
Thomson Reuters uses proprietary, state of the art technology to produce a low latency news feed. The news feed is designed specifically for applications and is machine readable. Streaming XML broadcast is used to produce full text and metadata to ensure that investors never miss an event.
Another Thomson Reuters news feed features macro-economic events, natural disasters and violence in the country. An analysis of the news is released. When the category reaches a threshold, the investor’s trading and risk management system is notified to trigger an entry or exit point from the market. Thomson Reuters has a unique edge on global news compared to other providers being one of the most respected business news agencies in the world if not the most respected outside of the United States. They have the advantage of including global Reuters News to their feed in addition to third-party newswires and Economic data for both the United States and Europe. The University of Michigan Survey of Consumers report is also another major news event and releases data twice monthly. Thomson Reuters has exclusive media rights to The University of Michigan data.
Other low latency news providers include: Need to Know News, Dow Jones News and Rapidata which we will discuss further when they make information regarding their services more available.
Examples of News Affecting the Markets
A news feed may indicate a change in the unemployment rate. For the sake of the scenario, unemployment rates will show a positive change. Historical analysis may show that the change is not due to seasonal effects. News feeds show that buyer confidence is increasing due the decrease in unemployment rates. Reports provide a strong indication that the unemployment rate will remain low.
With this information, analysis may indicate that traders should short the USD. The algorithm may determine that the USD/JPY pair would yield the most profits. An automatic trade would be executed when the target is reached, and the trade will be on auto-pilot until completion.
The dollar could continue to fall despite reports of unemployment improvement provided from the news feed. Investors must keep in mind that multiple factors affect the movement of the United States Dollar. The unemployment rate may drop, but the overall economy may not improve. If larger investors do not change their perception of the dollar, then the dollar may continue to fall.