Today the ECB announced that they would suspend accepting Greek debt as collateral for regular central bank loans. Previously there had been a waiver in place that allowed the ECB to accept junk-rated Greek government debt as collateral despite not meeting overall eligibility requirements.
The S&P 500 sold off quickly in response to the news. Many traders were left scratching their heads in the immediate aftermath, unaware that the ECB had made the announcement. Had they been monitoring the Twitter message stream they could have known immediately that the ECB had made a market moving change in policy.
Professional traders are increasingly using social data sources to inform their decisions. As the following chart shows, the volume of tweets related to the ECB spiked immediately following the news release. This was a clear signal that volatility was about to pop:
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Categories: Quantitative Trading