It’s hard to know what to make of this deal. I’ll try to analyze it more later, but in the mean time here’s what the buyer, Market News International has to say about why it wants NTKN:
The price paid for NTKN was in the “single digit million dollar range,” according to Deutsche Boerse documents. NTKN becomes a subsidiary of Market News International. Both companies deliver their products primarily by leased data lines but both firms maintain Web sites with material derived from their professional products. NTKN also provides a “squawk” service, by which breaking news is delivered in audio form.
The economic statistics are one ingredient of a vast chain of high-speed trading technology that has drawn waves of mathematicians, computer programmers and information technology specialists to the Wall Streets of the world in recent years, to supplement the more traditional savvy of human traders, strategists and analysts.
While the fresh economic numbers have been fodder for trading computers, developers have been trying to extend the ability of machines to interpret words and their context so that more of the second-by-second flow of information can be used to guide high-speed trading.
The release of the sensitive economic data is tightly controlled by government agencies to ensure news firms receive the material at the same time. Then they all compete to deliver the data faster and in more useful formats and combinations than their competitors.
As it is, faster than human traders can react, the computers analyze the trading environment and execute trades using carefully constructed algorithms designed to squeeze an extra margin of profit on the basis of speed.
This so-called algo trading by carefully programmed computers has steadily become a major generator of trading transactions, accounting for sizable portions of equities trading volumes each day. One recent estimate was that fewer than 300 high-frequency trading firms account for more than 70% of all stocks trading volume this year. Hardly limited to equities, high speed strategies are being increasingly applied to a wide range of asset classes.
As more firms follow the technological lead of the largest securities firms, investment banks, hedge funds and other market participants, information providers as well as market exchanges have been under pressure to develop faster and more reliable sources of the data delivery measured in only dozens of milliseconds. There are 1,000 milliseconds in 1 second.
Deutsche Boerse AG, part owner of Eurex, Europe’s largest futures market, this month is launching a pan-European exchange, Xetra International Market, which is built to allow investors to trade stocks from six European countries. The exchange has also bid for a controlling stake in the Warsaw Stock Exchange from the Polish government. Earlier in the month, the exchange acquired a majority share in Stoxx Ltd, a company intended to provide it broader access to the market for exchange traded funds. With Switzerland’s SIX Group AG it acquired Dow Jones & Co.’s one-third stake in STOXX Ltd, a firm that calculates and licenses stock-market indices.