Social Media – helping to facilitate FX workflows across all channels
ensures that staff ‘self censor’ their activities online – in much the same way as is done already in telephone and paper-based communication – which results in them using the new medium in an appropriate manner.
Nevertheless, a senior banker at a major sell side firm using social media says stringent legal and compliance rules represent an insurmountable obstacle to free usage of FX social networks and websites such as Linkedin and Twitter. “It is difficult to see us leveraging these sites for the reason that their membership is not regulated and controlled in the same way that our clients are regulated,” the senior banker says.
While the free-flowing of ideas is the life blood of social networks such as Linkedin – where an FX trading group may for example discuss a new trading strategy posted on a blog – investment banks maintain a close guard on all proprietary information. Sharing trading ideas in a forum which went beyond the client base of the investment bank would not, for example, be allowed. “We operate in a very regulated environment.
When information leaves the firm, it needs to have appropriate disclaimers and be directed at a specific client set,” says a senior banker at a major sell side firm.
Morgan Stanely has built “robust controls” which ensure its legal and compliance teams monitor content before it is published on the Matrix platform. “Content is then pre-filtered, depending on who the client is. Tis ensures that users see only what they are legally allowed to see,” says Arnason of Morgan Stanley.
However, Giffords points out that the mechanisms by which social media distributes information – where video blogs and pod casts are replacing the printed word – is facilitating information in a more free- flowing way which is possibly more difficult for banks’
legal and compliance departments to vet. “People generally speak more candidly on video than through the printed word,” he says.
Regulation
Te nascent nature of social media as a communications medium will inevitably result in financial regulators looking closely at the medium, with a view to imposing new regulations. One area that a senior banker at a major sell side firm feels will be scrutinised is the way in which blog posts on external social media can be used to move FX markets. “We are seeing retail Forex blogs being moved around desks and the story in the subject box is moving markets. Tis is an interesting about face. A lot of these retail blogs are starting to have an impact on the institutional market. Tis is something that I imagine regulators will look at,” the senior banker says.
Given that the presence of social media in FX markets is still somewhat
embryonic, financial regulators may develop
further rules governing the medium as it becomes more entrenched as a communications
tool. Te desire of the compliance and legal
departments of sell side banks and institutional FX firms to monitor the activities of employees using the new communication medium will also place restrictions on how the use of social media tools develop.
However, the growth of social media tools – whether in the form of iPad or iPhone apps to distribute FX research or sophisticated algorithms scouring blogs and social media sites for key signals of market sentiment – look set to inexorably rise. Tis should result in banks increasingly using social media channels for purposes such as making news announcement, rather than relying upon e-mail and press releases. While it remains unclear what the future holds for social media in the FX market, those firms who resist change and turn their back on such an increasingly influential medium are likely to find themselves being left behind.
january 2012 e-FOREX | 41
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