Today more than 200 billion dollars are traded across more than 6 billion trades a day on the
new york stock exchange and that's just one of the 60 major stock exchanges around the world
across the mall some 5.3 trillion dollars shuffles around today
mostly by high frequency trading algorithms and with that kind of money on the line
investors have literally trillions of reasons to try and gain a competitive advantage and to do
this over the last decade they've turned to big data but in a modern surveillance state there's
near infinite amounts of data so what information is even valuable and how do you make use of it
don't forget to subscribe so you never miss an upload and let's jump in
these days trading firms use a wide range of big data to gain an edge over their competitors
founded four years ago orbital insight started with analyzing massive satellite images
of oil tanks with floating lids around the world as the tank is filled its lid rises
while it's emptied the lid sinks in the sun casts crescent moon-like shadows on the lid of the tank
by detecting and calculating the changes of those shadows the company can estimate how
much oil is stored in 20 000 tanks and monitors around the world orbital insight sells this
data to hedge funds and energy companies amid the increasing uncertainty in the world's oil markets
this allows funds to keep day-to-day updates in the energy markets as opposed to just following
the company's quarterly filings and gain valuable insights into emerging markets where oil storage
data is either less available or less reliable last year the company disclosed that china had
been secretly stockpiling oil reserves sending markets tumbling amidst the higher supply
orbital insights moved past its oil foundations and today monitors more than a quarter million
retail locations 3 300 shopping malls 25 000 oil storage tanks and several other fields
like real estate commodity markets and commercial airports during the two outbreaks of e coli at
chipotle in 2015 orbital observed a sharp decline in car traffic and reported it to their clients
before a rapid 40 plunge in the stock price and a year later they found that the cars parked
outside jcpenney stores fell five percent in the fourth quarter of 2016 and used that information
to estimate the decline in sales before it was reported and orbital insights isn't the only
company in the satellite trading space rs metrics has been using satellite surveillance since 2008.
their big break came in 2010 when their data about a surge in cars parked outside walmart
predicted the stock was undervalued and that prediction came true as the stock would rise 10
in the following months and when traders wanted to monitor what el muskie was up to rs metrics flew
plain over tesla's fremont plant informed clients of tesla's new general assembly structure car
manufacturing activity and output production rates three days prior to becoming public knowledge
another interesting example came last november when a train carrying 268 wagons of iron ore
valued at more than 600 million dollars derailed in the desert of western australia iron ore prices
soared on the news that the supply of a material used across thousands of products was interrupted
but traders using rs metrics data carefully analyzed satellite images of the accident and
saw the ore piled into a flat area where it could easily be reloaded they bet that prices would soon
fall back down and a few weeks later the panic had subsided and the traders had made a fortune
all this satellite imagery isn't cheap real-time satellite data cost tens of thousands of dollars
a year and despite how it may seem the practice is perfectly legal these traders have actually been
taken to court over insider trading violations but the courts have upheld that this information
is out in the open and no one involved is a true insider to any of that information and during the
recent coveted outbreak analysts closely watched china's emissions not because they suddenly grew
green thumb but because the emissions closely monitored both china's factory production and
how many cars were on the road since china was the origin of that break investors watched how quickly
china got back to work to better understand how long the virus would affect the rest of the world
and this data is especially useful in china where you can't necessarily trust the infection numbers
published by the government satellite images showed a dramatic reduction in nitrogen dioxide
emissions which are released by cars power plants and factories in major chinese cities
between january and february nitrogen dioxide only stays in the atmosphere for less than a day
before reacting with other gases so this data gives a real-time view of the country's economy
a similarly temporary downturn in emissions even happened after the 2008 recession
and emissions picked back up as the world climbed out of that recession and these traders don't just
use satellite imaging in space to predict market movements high frequency trading algorithms
designed by investment firms combed through social media sites to analyze millions of tweets
from news and industry leaders to gauge market sentiment but obviously twitter isn't the most
reliable of sources so they use machine learning to try and weed out these unreliable sources
but these systems aren't perfect and can fall victim to the same misinformation as humans
in 2013 after the associated press's twitter account was hacked and a fake story about an
explosion that injured the then president barack obama was posted 130 billion dollars in stock
value was wiped out in a matter of minutes although stock prices recovered shortly it
showed how high frequency traders prey on social media and how it can be manipulated to impact the
algorithms that run the market reddit groups have even talked about purposely posting fake stories
about an airline crash on twitter with the hopes of the algorithms picking up the story
and crashing the stock price all so they can profit as time moves forward and data becomes
more ubiquitous and hedge funds continue to try to get any edge they can over their competitors
data will continue to pour into these firms and if the pass is any prologue the data will continue
to provide key insights into global markets and the traders who have access to it will continue
to profit tremendously but what do you think of these trading firms using big data is it an unfair
advantage over the common working man or is it just part of the system be sure to let us know
down in the comment section below have a great day and remember there's always more to learn