Last week I didn’t write a “Waters Wrap” column because I needed a mental break. This week, I’m publishing early on a Tuesday morning instead of Monday morning because…I’m lazy. As they say in Italy, mi dispiace. (Parlo di Italiano, cosi, cosi.)

Below, I’m going to talk about GameStop and Ion Group, but I would encourage you to read Max Bowie’s 4,200-word tome about private markets data; my look into Linedata’s plans to modularize its product offering; Wei-Shen Wong’s drilling into a project between Standard Chartered and Bloomberg to open up Korean Treasury bonds; the London Stock Exchange Group moving its main datacenter and the ripple effects from that move; and/or Joanna Wright’s wonky examination of vendors vying to provide consolidated market data under the SEC’s new system.

Let’s get to my very opinionated column.

‘Gamestonk,’ and other stoopid words

Much has been written about GameStop and the short-squeeze that was apparently (allegedly?) birthed on a Reddit forum called r/WallStreetBets. While we break a lot of news here at WatersTechnology, for a story like this, we prefer to sit back and sift through the wreckage. That’s what Reb Natale did with this deep-dive.

I really enjoyed this story (swear to God, not just pumping up our own work) because it was more of a philosophical discussion about what is data, and what is information. Here’s how Bob Sloan, managing partner at S3 Partners, put it: “I think the world is figuring out that there’s a huge difference between information and data. Information is things that are mass consumed, and data are the things that actually get the signal in the noise. But what happens is that we consume a lot of information. And we don’t necessarily know how to use data.”

And, as Reb wrote: “If we take away anything from the GameStop saga, it’s that the nature of valuable information, and thereby data—from where it lives to how it’s deemed accurate and relevant—is changing. Alt data signals have long been referred to as needles in haystacks, but as data providers and users begin—or rather, are forced—to consider uncharted, nuanced territory such as Reddit—and other forms of social media like the video-centric YouTube—as tantamount to protecting their clients’ and their own investments, the stack reaches the size of mountains and oceans, all while the needles remain specks.”

When the GameStop stock really started to take off, the first thing that came to my mind was, how did all of these alternative data providers miss these signals that had been growing since late spring 2020 on the r/WallStreetBets subreddit, which had somewhere in the realm of one million subscribers? And then you start to realize the insanity of conversation that takes place on Reddit—and I’m not talking about the horrifyingly racist, misogynistic, homophobic, (numerous other -phobics), and bat-shit crazy conspiracy threads that can be found on the site (though, Reddit is not as bad as some others).

Reddit has a main language all its own that’s part bastardized English, part modern-day hieroglyphic—otherwise known as memes. Somehow, Reb managed to get the “words” thicc, doggos, and tendies into a story. Sure, these words and memes exist on other social media sites that alternative data providers track for sentiment, but Redditors (much less hellscapes like 4chan or Something Awful) have communication systems all their own.

And actually, I think social media’s lingua franca is kind of beautiful. At its best, it’s funny and, in its own way, informative. It keeps people with short attention spans engaged. It’s quick and to the point, unlike my columns. And one meme can actually pack in a lot of information if you can decipher its code (As examples of what I find funny, I’ll use this and this from Twitter…I’m not a Reddit guy).

So you have words that are not English, but are based on the English language. You also have memes, which are images with (at times) writing embedded into the image. How do you actually “read” and contextualize these messages on a massive scale if you’re an alt data provider? On top of that, you have gifs—and I don’t give a shit what the creator says, it’s pronounced Gif with a hard G, as opposed to Jif, with a hard J…and if you disagree, I’ll be at your house in a giffy.

But let’s do a thought exercise. It would seem that social media posts, memes, and gifs are becoming more widely accepted as sources of insight, but is it worth the cost to try and find sentiment signals (aka data) in this ocean of information? It costs a lot to develop tools that can decipher these alternative social media sites, and error rates are quite high. But while Twitter and Facebook are more textual and, thus, more easily tapped into for sentiment, they also skew older (like me) and are arguably less sophisticated—if you just focus on those two sites for social sentiment, is that not ignoring the sites that can provide alpha-driving signals?

Let me do an Andy Rooney bit here: Is this not just getting weird? Alternative data has been called the new market data, so Elon Musk typing “Gamestonk!!” is market data? How fucking stupid is that? And if that’s the case, will there not be an overreaction from the hedge fund community looking to buy these “sources of information” coming from Reddit—I mean, have hedge funds even realized the ROI on Twitter/Facebook sentiment data yet? And if social media data is the new market data and, thus, Reddit and other fringe sites are the next frontier, doesn’t that go directly against what I wrote about in a recent column, that contextual data is more important than reactionary, scratching-the-surface data? And what happens when you have an entire community of millions creating a false reality about an absolute garbage company like GameStop? Literally, a week before this shit blew up in January, I went into an actual GameStop brick-and-mortar…and they managed to completely fuck-up my order. This is a dinosaur company that does not have good, new ideas—aka, fundamentals.

But then again, what the hell do I know? $GME is still hovering above a buck-eighty. Maybe I’m the sucker. Maybe the memes on Reddit can create a new reality on the New York Stock Exchange. Maybe non-fungible tokens are the way to make millions and not just a way for millionaires to funnel money. Does the proletariat have power in this new world, or are regular folk being given an illusion of control? As Reb wrote, “it’s clear that the line that used to starkly separate real life from online is eroding quickly”—so what does this new reality mean? Is Urban Dictionary a more useful dictionary than Merriam-Webster? Is this a world I want to live in? Is it time to finally leave this cesspool known as New York City and move to the mountains of Wyoming?

Or, maybe this was just a funny hiccup in the long arch of financial history. I don’t have answers. I apologize for this column being convoluted—I just don’t understand the difference between data and information anymore, and it would seem more and more, no one does. One final quote from Reb’s story, this coming from Lex Sokolin, global fintech co-head of ConsenSys, a blockchain software company, while speaking on a recent webinar (emphasis my own):

“There’s a series of a huge macroeconomic and political changes that have crowbarred the sanity of the financial markets and turned them into, broadly speaking, a circus for a variety of reasons. It’s not that Gen Z is cheap and only has 20 bucks to invest and therefore, Robinhood. But it’s the fact that Elon Musk has defeated Warren Buffet in being relevant. It’s the fact that the Federal Reserve has printed $6 trillion of assets and that interest rates are at zero. There’s nothing to invest in for the normal person. It’s the fact that being an expert and having knowledge has been debased, and is worthless, and whatever you feel is what matters. And it’s the fact that student debt per person has never been worse, and on average, Americans are broke. And so the only equity worth buying is a lottery ticket. Nothing else is worth buying.”

A growing ‘List’

At the beginning of February, WatersTechnology—aka this magnificent publication you’re reading right now—broke the news that Ion Group had acquired Dash Financial. A few weeks later, they put out a press release, but we had it here first (Sorry…this column is often an exercise in navel-gazing, but I’m quite proud when we beat the likes of the Wall Street Journal and Financial Times to a story, which happens more than you might think…damn, there I go again…anyway…)

What’s funny about that is we had first heard that Ion had acquired an Italian company called List S.p.A, which is a trading platform provider that mainly caters to the fixed-income market, and it was owned by private equity firm TA Associates. At the time, no one could confirm Ion-List, but then a few alerted us to Ion-Dash. After reporting the latter deal, we continued to look into the former. Then, in mid-March, a couple of Italian media outlets wrote that a deal had been made, but they provided no details or confirmation from any of the companies involved.

So we did some more digging, and here’s what we found, and no one from Ion, List, or TA Associates have countered anything that we wrote—though, to be fair, none of those companies have said anything affirming the deal since we wrote our story, either.

As we’ve written about with Ion’s acquisitions of Fidessa and Broadway Technology, these integrations were not straightforward. Ion has built an impressive empire in the fixed-income world through acquisition—it’s not much different than what SS&C Technologies has done through M&A in the trading technology space.

But here’s what I find incredibly odd: SS&C likes to get out there and talk about the acquisitions they’ve made and explain their strategy for these acquisitions; Ion (and this is just my opinion) seems to have an aversion to talking publicly about the deals that they make. I fully understand that Ion executives might not want to explain their acquisition to WatersTechnology, but why not be more vocal with other outlets?

And here’s why this matters: We spoke with a few List employees, and some of them were “shocked” when they read those first Italian media reports that Ion had acquired List. If you are “shocked” that your company has been acquired, odds are you’re going to go and try and find information about the company that is acquiring your firm, no? Those people might see that there’s been an exodus of Fidessa employees in the year after that Ion deal, or that the competition regulator in Europe forced Ion to split up Broadway. Why not try and get ahead of these headlines? Which comes to the main point: If you care about long-term innovation, would you not want to make sure that talented technologists at the acquired firm feel secure that they’re going to get to work on cool, cutting-edge projects in the future?

Again, not talking to us is fine, but why not put your vision for the future of these companies—and how you hope to help them to innovate—out there into the public sphere? It’s my experience that technologists want to talk about the cool shit they’re working on. At the very least, it would seem to me that internal communication could be improved if List employees are reading about the details of an acquisition in various media outlets.  

The image at the top of the page is “Relief of Ramesses IX”, courtesy of The Met’s open access program.