Financial technology is all about breaking new ground. Different firms are finding different ways of pushing the envelope on what investors can do with the help of technology. Market Prophit is one of the companies going where no other has gone before.
The financial data firm has created a series of indexes based solely on Twitter chatter. The first broad index launched through S&P Dow Jones last spring measures market sentiment on various securities through conversations taking place on Twitter every day. And if Igor Gonta, CEO of Market Prophit, has it his way, the benchmark will soon underline an ETF designed to tap into what he calls the “market sentiment risk factor.”
Gonta tells us how this all came about, and what it means to investors going forward.
ETF.com: Tell me a little bit about Market Prophit, and how it’s working off of Twitter.
Igor Gonta: Market Prophit is a financial big data company. We analyze real-time chatter about stocks, currencies and commodities on Twitter where people specifically talk about buying and selling securities. We track those conversations and we have technology that ranks each tweet as to how bullish or bearish it is on a scale of -1 to +1, where -1 is the most bearish sentiment and +1 is the most bullish sentiment.
You can in real time look how stocks are trending on Twitter, look at who is bullish or bearish on a stock, look at what the net sentiment is, and just get a feel for the buzz in the market.
We also score and rank everybody that posts a message on Twitter based on how predictive and accurate their stock market commentary is. Our technology is able to identify the mavens of the crowd, if you will, who are communicating predictive information about what to buy and sell, based on their performance in the past.
ETF.com: What's the universe here? Do you have certain people you follow, or are you canvassing the entire Twitter?
Gonta: We don't follow everybody on Twitter. We only follow specific streams of conversation where people refer to a stock by putting a dollar sign in front of the ticker. And that is called the “cashtag,” or the financial equivalent of a hashtag.
This nomenclature was adopted actually by the Twitter community to be able to easily converse and search stock-buying chatter about Apple, for example. So we track conversations about specific stocks where people say, "I am bullish $AAPL," for example.
We don't actually track individual people; we track stocks. And if new people happen to sign on to Twitter and start tweeting about Apple, we’ll track that. It automatically gets sucked up into our database. Right now, we track over 220,000 people who tweet about stocks. That number grows every day as more and more people sign up to Twitter and tweet about stocks.
ETF.com: If you need that cashtag, how do you track chatter about commodities and currencies as well? Can you track sentiment about the soybean crop? Or talk about oil?
Gonta: Right now we only track publicly listed securities, or private securities that people are talking about. Let's say, before a company goes public, people typically start tweeting with a dollar sign of the ticker that’s likely to be the ticker that the company will have when it’s public. We add special tickers to start tracking those conversations.
For example, people tweet about bitcoin, and they use the symbol “BTCUSD.” So we added that special symbol to track it. We can track real-time sentiment of what people are doing with bitcoin.
With crude oil, people will tweet with the symbol “CL_F,” which represents the first nearby futures contract of WTI crude oil. As long as we know the symbol, what people tweet about, we can add it to our custom list.
ETF.com: And you’ve created a sentiment index off of the chatter? Does all that info go into one single index, or do you have various indexes? How are you disseminating this information?
Gonta: We have an index for each stock. You can go on our website [www.marketprophit.com], type in the ticker symbol of any stock, and if we track it, you'll see a real-time set of indices for how sentiment is tracking throughout the day on that stock, and even over time historically for that symbol. We track over 20,000 securities.
ETF.com: Do you need permission from Twitter to do this?
Gonta: We buy data from them, and we process it and disclose these indices. We’ve also launched an index with S&P Dow Jones—the Market Prophit Social Media Sentiment Index—which we’re now looking to create an ETF around.