Rob Daly: The Curious Case of Social Media

Listen to any technology evangelist speak these days and you will no doubt hear that social media has created new opportunities to distribute and consume information like never before. The old centralized publish-and-subscribe distribution method has been replaced by a decentralized model where everyone is a publisher and a subscriber. Or to put it in more familiar industry terms, the world has seen a fragmentation of content as everyone becomes their own publishers.
But how important or insightful are the observations or rantings of a lone individual? It truly depends on the individual. However, aggregate them and one gets a good view of the current herd mentality.
A recent article published in the Financial Post revealed that researchers from Indiana University demonstrated that the “mood” of the posts on microblogging site Twitter accurately predicted moves in the Dow Jones Industrial Average (DJIA) about 90 percent of the time, days in advance.
This capability has not been lost on Wall Street, which has been incorporating unstructured social media data into its market calculations for the past few years.
Vendors have been making it easier—for example, complex event-processing (CEP) platform provider StreamBase Systems released an application programming interface (API) for Twitter back in 2009.
Most financial firms take the data and feed it into their sentiment engines looking for trends, while others use it to manage their reputational risk. Neither process truly involves adopting social media within the organization.
Besides possible communications between broker-dealers and clients, where could the industry logically adopt social media? According to one senior statesman of the market data industry, the over-the-counter (OTC) market is ripe for adoption, but he hedges his position by saying that it might be a decade before the industry does so fully.
But is social media the proper model for the industry, I wonder? While individual users see a benefit to be gained from participation, those providing the network and selling the demographic information to third parties are making the real money.
This is nothing new for the capital markets. Everyone is familiar with the current market data model, where end users provide quotes to the market, and the exchanges and market data aggregators in return bundle it and sell it back to the community.
Social media will not change a thing, except how much data could be provided.
Look at the typical demographic data collected every day by the social networks. The Twitters, LinkedIns and Facebooks of the world know how often their users log in, what activities they prefer to carry out online, who their contacts are, and how regularly they interact with them.
Is this the sort of data that financial institutions really want getting out into the wild? Individuals might not know or care how much information they give up to the marketing partners of the social network providers, but the last thing firms want is to give the model makers in rival firms any data about their trading strategies.
Social media adoption might be inevitable as younger generations that have grown up with the technology come into the market and demand it, but this will be counterbalanced by non-tech-savvy regulators who drag their heels in regulating the new model.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
M&A activity, syndicated loans, a new tariff tool, and more
The Waters Cooler: LSEG and LeveL Markets partner for new order type, QuantHouse gets sold to Baha Tech, and Fitch Ratings has a new interactive tool in this week’s news roundup.
Nasdaq, AWS offer cloud exchange in a box for regional venues
The companies will leverage the experience gained from their relationship to provide an expanded range of services, including cloud and AI capabilities, to other market operators.
Bank of America reduces, reuses, and recycles tech for markets division
Voice of the CTO: When it comes to the old build, buy, or borrow debate, Ashok Krishnan and his team are increasingly leaning into repurposing tech that is tried and true.
Crypto exchange EDX takes its tech into its own hands
The crypto exchange and clearinghouse, founded in 2022 by industry heavyweights, has built out its technology to meet the needs of the institutional market. In the process, it has learned important lessons about partnering with vendors, building in-house, and, ultimately, control.
FCA sets up shop in US, asset managers collab, M&A heats up, and more
The Waters Cooler: Nasdaq and Bruce ATS partner for overnight market data, Osttra gets sold to KKR, and the SEC takes on DOGE in this week’s news roundup.
EMS vendors address FX options workflow bottlenecks
Volatility is driving more buy-side interest in automating exercises and allocations.
BNP Paribas explores GenAI for securities services business
The bank recently released a new web app for its client portal to modernize its tech stack.
Treasury selloff challenges back-office systems, datafeeds
FIS and Trading Technologies suffered downtime during peak activity.