Information Delivery Finds its Mark in Social Media

In today’s information age, we often take for granted that breaking news stories from across the globe will be delivered to our doorstep in an instant. We have come to expect a deluge of information from radio, television, newspapers and social media to provide not just journalistic coverage of political, business and society’s notable events but also a diversity of viewpoints in social commentary and opinions from the multitudes.

But this was not always the case. It began in the early part of the twentieth century where the machinery of information began to change the rules. Major events from the sinking of the Titanic to Lindbergh’s crossing of the Atlantic catapulted the “information hunger” to titanic proportions.  Marconi’s telegraph and the rotary press, which made possible continuous printing, were game changers delivering breaking news on the calamitous and the momentous.  These technical innovations not only fed the insatiable frenzy for information they created it, which has led to the familiar face on the evening news and the paparazzi.

Wind the clock ahead to present day and the narrative behind information delivery has found its mark in social media.  The information flow from social networks such as Twitter, Facebook, Blogs and many others  not only show trending topics but very often deep insight from the minds of experts and the experienced on a specific business, market trends and products or services. This represents a significant paradigm shift in information’s delivery, consumption and value. While social media can be more noise than signal, the modern enterprise now views twitter as a strategic weapon, a tool for predictive insight to feed business objectives from customer satisfaction to product refinements.

The Hash Crash can be defined as an inflection point, motivating a “sit up and take notice” attitude towards social media among financial market participants – how much influence does social media have over the markets and what value lies within to derive alpha?

OneMarketData’s Social Media survey looks to answer that and many other related questions on using social media as the fodder for predictive analysis.

Social Media Survey Takeaways

The twenty-question survey reveals attitudes towards social media ranging from fear and uncertainty to a belief in the untapped potential.

  • Traditional news sources take a back seat to social media outlets for news and information delivery. And while the journalistic narrative may be the breaking scoop, just as important to the story is the meaning behind the story as expressed in the vast collection of commentary and opinions.
  • Social media has reached widespread use as a vehicle for conveying news, information and insight. But on the flip side – accepting social media as a credible, reliable source of actionable information has not happened. Within the financial industry there is still a skepticism that social media is more noise than signal – the fear of false positives and security breaches looms large. The Hash Crash was only the first major breach, itself a predictor of future malicious hacks.
  • Yet, there is also acceptance of the inevitable – the information flow of social media does influence financial markets. And it will catapult efforts to leverage this data source for actionable insight for incorporation into trade model design, back-testing, optimization and benchmarks. Increased competition, thinning margins and risk concerns will drive a think-out-of-the-box attitude towards social media.  But by and large the challenge is distilling content into sentiment indicators through text pattern analysis of positive and negative commentary. This will take shape in the analysis of captured history and real-time consumption of the social media information flow advancing data management and complex event processing (CEP) technologies.

The Future of Regulatory Oversight

As social media becomes more accepted as a tool in our marketplace regulators will be watching closely. That began with the Securities and Exchange Commission’s (SEC) endorsement of the use of social media outlets to distribute material, non-public corporate information. Somewhat embarrassingly and an unlikely coincidence for the Securities Exchange Commission, the Hash Crash occurred just three weeks later. This malevolent breach of a trusted new source was notoriously bold but is also the catalyst for social media outlets to tighten security. Safeguarding the information flow is tantamount to its credibility, a obvious indication that social media outlets will be increasingly driven to regulate themselves, monitoring usage and potential abuse.

Yet, influential market participants seeking the spot light have clearly proved social media will be under increased regulatory scrutiny in the coming years. It’s not so much that highly regarded authoritative figures like Carl Icahn post tweets announcing their position in a high profile business such as Apple. It’s a matter of who’s listening. The sheer number of social media consumers, each with their own voice defines much greater market-moving potential than anything else ever done in the past – something Marconi himself could have never imagined.

The survey report can be downloaded here.
A video Interview on TABB Forum is available here.

Once again thanks for reading.
Louis Lovas

For an occasional opinion or commentary on technology in Capital Markets you can follow me on  twitter, here.

About Louis Lovas

Director of Solutions, OneMarketData, with over 20 years of experience in developing cutting edge solutions and a leading voice in technology and trends in the Capital Markets industry.
This entry was posted in Algorithmic Trading, Analytics, Big Data, Complex Event Processing, Equities, Foreign Exchange, HFT Regulation, OneMarketData, OneQuantData, OneTick, Tick database. Bookmark the permalink.

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