FEATURE
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that while news feeds including social media like Twitter have proved reliable in predicting levels of volatility in markets such as FX, the nascent technology being used to decode trends on the social network is proving to be far less effective in detecting its impact upon directional price movements. “Some say they feel they’re flying blind in a storm, if they don’t have automated news feeds plugged into their trading algorithms. Meanwhile, others are still trying to understand the medium and have not yet found the secret sauce to make sense of news,” Giffords says.
However, Teodorou points out that filtering out inconsequential “noise” which will not have an impact on FX markets has always been a skill which FX traders have needed. “I think in a few years technology will evolve to the point where tools will exist which will allow you to more accurately interpret data [from social media sources such as Twitter],” she says.
Social media also offers new avenues for FX firms to obtain access to potentially market sensitive information. Linkedin has become an increasingly valuable repository of corporate information. For example, users can follow particular FX institutions,
which may provide an early notification of corporate acquisitions or staff moves. Should the FX trading arm of a hedge fund be poached by a major sell side firm, this may be revealed by a change of job status made by the employees on their Linkedin profiles, regardless of if an official press announcement has been made or not.
Risk issues
As well as new opportunities, social media does of course also bring potential new threats to institutional FX firms. Tere are concerns within the FX industry about possible reputational risks that the new world of social media brings, along with new compliance and legal issues. “Some firms do get a paralyzing fear because everything is so public,” concedes Teodorou. However, she says it is simply a case of banks and institutional FX firms adapting policies for how the business should be represented for the new social media medium. “Behaving in a professional manner is no different, whether that’s online or offline. It just comes down to tailoring a policy so employees know what is expected of them.”
Teodorou says broadening expertise around the different dimensions of social media provides an
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