Analytics the magic wand for brokerage firms

“The secret recipe for success in stock market is simple. 30% in market analysis skills, 30% in risks management, 30% in emotion control, and 10% in luck.” — Benjamin Lee

Data analytics, the disruption innovation of our times has proven to be a versatile genius. It has been creating waves in the field of stock broking too. In the financial world, where timing is everything, every little piece of information in the nick of time can prove valuable. After all, time is money in business.

In the present scenario where trading in the stock market has moved into platforms that have made it effortless and seamless, it is only pragmatic to consider that the data amassed in this stream can be utilised to make better recommendations. Data analytics can leverage the stockbroking experience to one of an informed and judicious approach. Broadly classified, analytics can help broking companies in the realm of Trade Execution, Automated Trading and Advisory Services.

1. Real-time insights are critical to strategic decision making in the financial world. Data analytics has the capacity and technology that can move this industry from a desk oriented one to a game-changer where real-time analysis can be made in a more competent manner.

2. Analytics will be able to track investor behaviour and customise recommendations and enhance the overall user experience.

3. Risk strategies can be fully accredited to data analysis. It supports decision making and strategy creation.

4. Cutting down trading and processing time is another turning point in analytics. Auto-generated reports and insights are critical to bringing down the turnaround time in investments and thereby the cost.

5. Machine learning algorithms can use predictive analysis to help a trader/investor analyse a stock along with its historical data and predict likely outcomes and scenarios.

6. Natural language processing can scour through volumes of data and make decisions based on sentiment analysis which is the very essence of financial markets. We live in such an interconnected world that a sneeze in the markets across oceans can have reverberating effects in markets, elsewhere.

7. Data analytics have moved from the price factor analysis to a more all-rounded approach where PESTEL analysis seems to be the new mantra.

8. High-frequency trading is one where there is very little or zero human interference. Here machines make the most critical decisions with the help of data analytics and artificial intelligence.

9. Machine learning is making waves with computers that are learning from their past mistakes and creating accurate decisions, devoid of human emotions and bias.

Data analytics and machine learning have made it possible to make unthinkable decisions made in lightning speed with utmost accuracy. It is not long before data analytics becomes a mainstay of financial business and particularly broking homes. It is only a matter of time before we realise that this technology is embraced at the right time for brokerage houses will guarantee a competitive edge in the financial markets.

“If stock market experts were so expert, they would be buying stock, not selling advice” – Norman Ralph Augastine

Authors – Benila Jacob, Mark John