Tool lets traders mine Twitter for alpha

A tool monitoring posts on micro-blogging website Twitter aims to give buy-side traders an edge by digesting relevant information before traditional news services distribute the news.

By None

A tool monitoring posts on micro-blogging website Twitter aims to give buy-side traders an edge by digesting relevant information before traditional news services distribute the news.

Social Sonar, a tool developed by web monitoring firm Eagle Alpha, follows influential people on Twitter and scans posts, known as tweets, for information relevant to specific stocks and global economic topics that influence market movements.

In a statement, Eagle Alpha said tweets from people on Twitter such as politicians and company CEOs have proven to impact stock prices, although a disconnect still exists between the publication of these tweets and their coverage through traditional news media, which in turn informs markets.

“Twitter is full of alpha-generating potential,” says Emmett Kilduff, CEO and founder, Eagle Alpha. “Currently this potential is masked by excessive white noise, inefficiencies in accessing relevant tweets and compliance concerns. Social Sonar changes all that. It provides alpha-generating insights direct to traders and investors in a convenient, controlled and auditable fashion.”

The firm said there have been a plethora of examples where real-time monitoring of tweets could led to alpha generation. In July 2013, a tweet stated that UK Justice Secretary Chris Grayling was calling in the Serious Fraud Office to look into security company G4S because it had refused to cooperate with a voluntary forensic audit. Within 32 minutes, a newswire published the news and the share price dropped by 7%.

Twitter has emerged as a leading platform for instant news publication, where information is published directly from the source, rather than through trusted, established news media. Twitter now averages some 500 million tweets a day from around 200 million users.

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