Can the Markets Integrate Social Media?

A senior statesmen of market data and I recently discussed the impact social media would have on the over-the-counter (OTC) market. Maybe as a journalist I'm cynical, but when covering the capital markets it is hard to be an optimist these days. To be fair, we were talking about data consumption habits that might be two or three decades away, rather than those that are coming in the next few years.

The gist of the conversation was that social media is driving people to be both publishers and consumers of information and that the old publish-and-subscribe model will fall by the wayside as new generations of social media savvy dealers and traders enter the business.

The industry is already familiar with the mechanics of the social media model, in which immense pools of users keep up with their friends, play games and explore the social networks. In exchange for free use of these environments, users provide demographic and personal information, which the operators of the social media outlets turn around and sell to marketers.

To translate that model into a financial services environment, messages about vacation photos would be replaced by messages about requests for quotes (RFQs) on OTC instruments. If today’s social media rules were applied to the financial markets, not only would the social network operator share with others where RFQs are sent, but also which dealers traders use—and how regularly—as well as which instruments and markets they prefer to trade.

Social media is predicated on consensual information leakage on a grand scale. Many people willingly hand over personal information in order to tend virtual farms or grow their fictional organized crime families, presumably because they don’t understand the value or the amount of the information they are giving away. If they knew, they would surely be horrified.

So, it is doubtful that the model could be adapted to an environment where everyone fights to stem the tide of information leakage.

Send your thoughts on the topic to me at rob.daly@incisivemedia.com.