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(Bloomberg) -- Amateur investors who banded together on Reddit during the meme-stock saga are poised to help hedge funds and asset managers place their market bets.
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That’s because of an agreement between Intercontinental Exchange Inc. and Reddit Inc. to develop new data products for the financial industry that leverage the swathes of daily posts, comments and videos on the social-media firm’s forums.
Just like any other data point, Reddit’s content will be analyzed to help detect trends impacting capital markets, Chris Edmonds, president of fixed income and data services at ICE, said in an interview. These could inform trading strategies, algorithms and gauge public sentiment of markets in real time.
“If we can capture the sentiment of posts, along with the changes, that becomes a valuable piece of information,” Edmonds said.
ICE, which owns the New York Stock Exchange, will begin rolling out the service to its institutional clients including hedge funds and asset managers. Over time, that will expand to a broader client base, Edmonds said.
“I don’t think we all know how to use this data input, but I think we’re beginning that journey,” he said.
Reddit became a go-to platform for day-traders during the pandemic, where they congregated to coordinate buying struggling stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. That sent prices soaring, ushering in the meme-stock era and foisting heavy losses on some hedge funds which had shorted those stocks. Reddit, which listed on the stock exchange last year, has since grown to more than 101 million daily active users with more than 22 billion posts and comments.
Exchange operators like ICE are constantly seeking new ways to package data and offer new products to the finance industry. As the operator of NYSE, ICE profits from its data feeds and real-time market analysis.
“The conversations that take place on Reddit on any given day or any given minute can offer a real-time look at the news and trends that are happening around the world,” Jonathan Flesher, vice president for business development and partnerships at Reddit, said in a statement about its ICE agreement.
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