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Trader: social beast or lonely wolf?

At a time where Facebook could be seen as the 4th country on earth from the point of view of its “population”, how long will it be before social media reaches the trading floor? Of course, there are some very understandable hurdles which explain the reluctance financial firms have in adopting these tools. Security and confidentiality for example are important issues. Companies don’t want their employees to spend precious time updating their Facebook status or tweeting about what they watched on TV last night whilst they are on company time...

 

But if we have a closer look, social media has been part of the game for a while. For example, Bloomberg offers an IM solution where contacts can live chat to each other by accessing the Bloomberg directory. It is the first foot social medias put through the door which will prevent it to be ever closed again. Whose IT manager can still explain today to his traders and sales that these tools can’t be used because they are difficult to control? Who will explain to the new Y-generation traders being hired today that they can only use traditional methods of communication such as the telephone? The FSA recently removed the exemption on recording mobile phone calls and firms will now have to invest in devices to tape traders’ calls. This opens a Pandora’s Box on how to prevent traders from using social media tools directly from their Blackberry or iPhone especially if they can’t from the trade floor. At a time where Wikileaks publishes secret diplomatic exchanges who can sincerely believe that any disaster happening on a trade floor will be kept secret? We all know that tools like Twitter enable to open several points of fire at the same time. What would be the impact on the firm’s image if it can’t react in real time using the same weapons?

 

Nature doesn’t like vacuum. If firms don’t provide a minimum of social tools to their trade floor employees, users themselves will close the gap in an anarchic and uncontrolled manner to satisfy their natural sense of being part of a community. Easier to say than to do; but, there are some ways of introducing social tools in a “secure” manner. For example, IM chats like emails and voice can be recorded. There are now solutions available on the market to tape mobile conversations and sms exchanged complying thus with regulation and internal security policies. Concerning social networks, if the professional interest of Facebook or Youtube can be questioned, there is becoming more and more proof of interest in “more secure” finance-dedicated professional social networks. Besides providing financial news and insights on companies and key topics, those finance-dedicated social networks are above all a fantastic professional directory containing thousands of finance professionals in the world. Imagine you are a London trader and you want to deal on Kazakhstani bonds; quite a niche market isn’t it? Finance-dedicated social network is the answer! Like on LinkedIn, but with more accuracy and pertinence, you can find the rare birds in few seconds where it would have taken ages and tens of phone calls in a traditional manner.

 

At the same time, the risk is that this kind of tools becomes little by little a “very very dark pools” enabling virtual transactions to take place. That’s also why – till the Regulator speaks - the introduction of such social medias has to be always accompanied by internal policy rules explaining to the employees the best practices to use those tools…and the limits.

 

The game is open; it’s time to get involved!

 

Thierry Charvet,
Head of Marketing & Strategy, Orange Trading Solutions

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Comments: (2)

A Finextra member
A Finextra member 15 December, 2010, 17:05Be the first to give this comment the thumbs up 0 likes

You're right, Thierry.  Finance is already social, and retail traders and investors have already embraced it.  I guess the question is whether the institutional trading floor is culturally ready for it.  For many, social media is synonymous with Facebook, and that means poor security, viral videos, and FarmVille.

Institutional finance has historically been an early adopter of cutting edge IT.  This was the case beginning in the 70s until the early 90s when the retail side sat up and recognized the potential of the Internet.  Social media is a largely consumer-centric phenomenon, so it would seem to be more attractive to retail financial services right out of the gate, but I think as this technology continues to evolve it will eventually find its way, in one form or another, to the institutional trading floor. 

A Finextra member
A Finextra member 16 December, 2010, 08:17Be the first to give this comment the thumbs up 0 likes

Hi David, I share your point. Like in Jurassic Park "life finds its way in one form or another" ;-) Evolution pace is a matter of culture but the trend is here: just need to see the increasing number of members of finance dedicated networks like Finroad to predict success of social medias on trade floors.