#316
Time Is Money

In a world where milliseconds can be worth millions of dollars, going to extremes to gain a small edge can be worth the hassle.

This week, a few hedge funds breached the audio feed at the Bank of England’s press conference – gaining a full 8 seconds on the publicly available video feed – in an attempt to interpret hints about the future path of interest rates. Even nuanced differences in language have been known to move currency and bond markets.

Today, such information arbitrage is often associated with hedge funds, but the quest for information advantage has been carried out since the beginning of commerce.

In one old story, Galileo presented the Doge of Venice with his first telescope. After bestowing the gift, he took the Doge to the tallest tower in Venice to spy on the incoming trade vessels. When they had knowledge of the exact cargo arriving, they then rushed to the market and made a huge profit. Information arbitrage at its finest!

The pursuit of “alternative data” to inform investment decisions will most certainly continue, even in the face of known or threatened action by regulators, such as the U.K. Financial Conduct Authority’s potential investigation into the legality of the audio breach.

The question is – will hedge funds continue searching for what the "Dollar Bills" of the industry call the “black edge”, in a market sometimes determined by milliseconds?