Thousands of news articles each day are piped by Reuters into financial-services firms and other businesses to help them make decisions. Now Reuters has also come up with a way to machine-read this content and rate it as ‘good’, ‘bad’ or ‘neutral’ as it relates to the subject of the story.
The Reuters NewsScope ‘sentiment engine’ is server-based software that interfaces with the Reuters Market Data System platform to automatically scan a story in milliseconds to pass judgment on whether the news is good or bad.
The Reuters sentiment engine does this in several ways, such as picking up on key phrases describing the subject of the story. For example, these might be “disappointing results" or "stellar performance" or "challenging environment”, all of which give an idea of the story's sentiments.
"This linguistic analysis of an entity, such as a company, assigns a negative or positive score to words and phrases," says Rich Brown, Reuters business manager for NewsScope about the sentiment engine used with the RMDS middleware for the news feed. The sentiment engine was developed based on software from UK-based firm Corpora.
Financial news stories, in particular, may have impact on investment decisions, Brown notes. By getting an instantaneous read on the gist of what stories are saying in terms of good or bad news can help money managers make faster decisions.
Moreover, Reuters anticipates its good-bad-neutral scoring system, which can be configured to reflect specific evaluation requirements firm may want, could be used to automate trading decisions. "They may find they can trade based on it," Brown says.
Today, investment firms make use of programmed, automated trading systems that can make buy-and-sell decisions based on complex benchmarks related to economic activity and other variables. The Reuters news scoring would be another element that could contribute to the execution of automated trading, Brown says.
The Reuters NewsScope sentiment engine, expected to cost from several hundred thousand dollars to a million, is now in testing and is expected out later this year.