The British press are currently relying on two topics for slow news days
; the first is the Leveson Inquiry
into UK press culture, practice and ethics; the other is the size of bankers’ bonus payments.
Triggered by claims the News of the World newspaper used mobile phone hacking to gain private information, the Leveson Inquiry is posing the question of when information is considered private, or when it is in the public interests and therefore justifies reporting upon.
The Leveson Inquiry is only a small, albeit interesting, part of the current news industry transformation. The proliferation and globalisation of both camera phones and Twitter has meant there’s no shortage of breaking news and content available. For business information, as reported by CNBC’s special Twitter Trading report
, details that emerge on Twitter could well be more timely and accurate than is available through other sources.
The DeepWater Horizon’s Engineer’s tweets as reported by CNBC
, is a great example of this: those following the tweets would have quickly gleaned that BP had a bigger challenge on their hands than first intimated. BP Engineer Grindal (@jgrindal
) tweeted on 26th
May “This is a true worst-case, and the industry will be paying for it for years.” It wasn’t until 29th
May that BP confirmed their operation to shut off the flow had failed, resulting in its stock dropping 15 percent.
So what is the relevance to capital markets?
Your tech-savvy retail investor will likely already be using Twitter and online forums, such as Stocktwits
, as a freely accessible and timely source for accurate market data. So it seems strange that this level of market information appears untapped on the professional trading desk. In reality, it’s likely that many brokers and traders do use these unofficial social media channels to glean information before it is reported and analysed through more conventional market news sources.
Raising the possible requirement for Twitter and social media in the corporate trading environment invokes varied reactions from trading floor IT Heads, although the expectations that regulatory requirements will buy breathing space are consistent.
Indeed, last year’s FINRA ruling against a broker that used Twitter to share trading tips with 1,400 followers proved that this is an area that Regulators are focused on. As reported on DealBook
, in this particular instance, the broker sent abbreviated tweets on stock recommendations without telling her firm, and also without disclosing that she held positions on these stocks. Clearly, there’s going to be difficulty in disclosing all material information within 140 characters. The Securities and Exchange Commission (SEC) requires banks to monitor and archive employee communications, and doing so on third-party platforms such as Twitter is much harder than on corporate e-mail programs. As a result, many financial institutions do not allow social media use, or if they do, tweets or status updates need pre-approval.
However, where tough market conditions mean that traders need every edge they can get to stay ahead of competitors, is it really viable that the value of this real-time information and intelligence stops the wrong side of the corporate firewall? Much more pragmatic is the use of social media as a passive, complementary source of information rather than a channel of communication to counterparties. For now, this is restricting the networking in social networking, but at least it means institutional traders are not finding out about breaking news the day after everyone else.