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?
Time Is Money
Hedge funds eavesdrop on vital Bank of England briefings - A head start of a few seconds allows hedge funds to make millions, as The Times discovered that one of the Bank of England's suppliers has been sending audio to clients before the rest of the world. Read more
How hedge fund investors are making money off the data you’re giving them for free - Hedge fund investors attempt to trade off that alternative data. Hundreds of data points are often generated from simple transactions and captured by the hundreds of companies in the transaction supply chain. Read more
FCA investigates Bank of England security breach - The UK’s financial watchdog has launched an investigation into a security breach at the Bank of England that allowed hedge funds early access to an audio feed of Mark Carney’s market-moving press conferences. Read more
Inside the secret bank behind the fintech boom - If you want a glimpse of the future of banking, don’t look to Silicon Valley or Manhattan’s financial district. Instead, drive across the George Washington Bridge to Fort Lee, New Jersey to the HQ of a tiny FDIC-insured bank named Cross River. Read more
JPMorgan rolls out robots to scrutinize banker travel, expenses - The bank has started using machine learning technology to process expense reports and determine whether they comply with company policies. Read more
Vodafone targets Africa’s unbanked with ambitious plans for M-Pesa - Vodafone plans to transform its M-Pesa African mobile payments service into a financial platform spanning the continent as it seeks to unlock the value of one of the world’s largest fintech networks. Read more
Singapore digital bank wannabes must prove they can profit - Grab and gaming company Razer will need to demonstrate how their millions of users can help them generate profits if the two technology firms are to win one of Singapore’s coveted virtual banking licenses. Read more
Brazil's Banco Inter vows to prove Goldman, Morgan Stanley wrong - When Joao Vitor Menin took over his family’s banking business, it was a mere sideline to his father’s empire of low-income housing. Four years later, with funding from SoftBank Group, it’s grown into the clan’s largest asset and one of Latin America’s hottest fintech ventures. Read more
When is a blockchain startup not a blockchain startup? - The FT's Alphaville has a dig at DAH's new business model - "It’s awkward when you set up a business around a technology that you reckon is going to disrupt global finance so you name your business after said technology, send your CEO on speaking tours to evangelize about said technology, but then decide that said technology isn’t going to do anything useful for you, isn’t it?" Read more
US SEC wants to redefine ‘accredited investor’ classification
To be classified as an “accredited investor”, one must possess a net worth of more than $1m. It is unclear if that minimum will change, but at least the SEC is cognizant that the status quo does not suffice. Read more
A pioneer of negative rates pauses the experiment - Sweden’s central bank, the first to apply negative rates on deposits, moves key rate back up to 0% from -0.25%. Subzero rates have pushed more money into equities and bonds, with holdings in mutual funds reaching all-time highs. Read more
Abaka - London based retirement solutions provider for enterprise raised $6.5m in Series A funding from Thames Trust, Ace&Co and Downing Ventures. Read more
Bushel - North Dakota based agtech platform for agriculture raised a $19.5m Series B round led by Continental Grain Company. Read more
Domio - New York based renter of apartment-like hotel rooms raised $50m in Series B funding led GGV Capital. Read more
Huckleberry - San Francisco based insurtech platform for SMBs raised $18m in Series A funding led by Tribe Capital. Read more
Modern Treasury - San Francisco based B2B payment operations software provider raised a $10m Series A round led by Benchmark. Read more
Leapfin - San Francisco based finance ops automation platform raised $4.5m led by Bowery Capital. Read more
Levelset - New Orleans based payment startup for contractors raised $30m in funding from Horizons Ventures. Read more
Pepper - Los Angeles based provider of spend analytics for startups raised $5.6m in seed funding from Upfront Ventures, Lerer Hippeau, and Manta Ray Ventures. Read more
Rebank - London based digital business banking platform raised a $2.8m seed round led by ADV. Read more
Ripple - San Francisco based blockchain developer behind XRP has raised $200m in Series C funding led by Tetragon. Read more
ZestMoney - India based consumer lending startup raised $15m led by Goldman Sachs in a Series B extension. Read more
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