New Survey Points to Growing Influence of Social Media in Trading

New York - 22 July 2013

OneMarketData’s survey results indicate interest in and use of social media is on the rise among the trading and investment community

OneMarketData, a leader in tick data management and analytics, today issued the results of a survey looking at the use social media by trading and investment firms.

The survey asked financial market participants from the buy-side, sell-side as well as financial experts from academia about their current and planned use of social media to make trading and investment decision. The results of the survey point to a growing interest in social media in financial markets, while it also revealed a healthy skepticism about the ability to measure the quality of signal that social media transmit to the market.

The survey was conducted in the wake of the AP Twitter hack that occurred on April 23. That event revealed potential weaknesses in social media’s usability to feed trading and investment strategies, but it also demonstrated the impact the new form of data already is having on financial markets.

Of the market participants surveyed, more than half said social media provides opportunities to capture alpha on a daily basis. While only 18 percent of respondents say they are using social media data today, another 35 percent said they are currently researching how to incorporate social media into their trading and investment strategies.

Equity traders were considered to be the most likely beneficiaries of the use of social media data, according to 53 percent of respondents. More than 30 percent of participants said futures and options traders stood the most to gain from the use of social media data. Fixed income (43 percent said) and foreign exchange (29 percent said) were the asset classes whose traders were least likely to benefit from the use of social media.

While 75 percent of respondents said they thought social media could add value to both historical trend and near real-time analysis, 46 percent of respondents said their firms would not be using or investing in the use of social media in 2013. The biggest obstacle to a broader industry adoption of social media usage is its potential for false positive signals, according to 62 percent of respondents.

“We’re in the middle of an important change in the way social media is being viewed by financial market participants,” said Louis Lovas, director of solutions at OneMarketData. “While there is still quite a bit of skepticism in the industry around the credibility of social media as a source to generate alpha, interest is rapidly growing as both regulators and market participants have signaled they are paying attention to the medium. As social media data continues to gain validation in the industry, demand for solutions that can harness the power and reduce the risk of this new data source will also grow. As we hit that point, our view is that social media will prove to upend the way market participants use information to trigger trading and investment decisions.”

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