Colt social media and trading findings

© 2010 Colt Technology Services Group Limited. All rights reserved.

Social Media & Trading Survey

February 2013

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Social media and trading survey approach

• 360 finance professionals completed an online survey during October 2012

• Job roles and responsibilities of respondents are split as follows:

S1. Which one function best describes your primary role and responsibility within your company / organisation? Base: Total (360)

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Public sentiment and social media

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The affects of online sentiment

63% believe the performance of individual stocks can be directly

linked to public sentiment contained in social media channels

Q1. To what extent do you agree or disagree with the following statement: “Performance of individual stocks can be directly linked to public sentiment contained in social media channels, such as Twitter.” Base: Total (360)

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Social media is regarded as more of a trailing indicator than leading indicator

Q3. Do you see analysis based on social media as more of a trailing indicator or a leading indicator when making informed trading decisions? Base: Total (360)

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Barriers to using social media in trading

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Lack of confidence in the accuracy of information is the biggest barrier to adoption

Q4a. Which of the following do you see as barriers to employing trading algorithms (predictive computer programs that assist in decision making) based on sentiment and topics exchanged over social media? Base: Total (360)

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Accuracy of information was also voted as the single biggest barrier to adoption

Q4b. Which is the single biggest barrier? Base: Total (360)

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Is data from the likes of Twitter trustworthy enough to inform credible trading decisions?

Q2. To what extent do you agree that the analysis based upon the likes of Twitter are trustworthy enough to inform credible trading decisions? Base: Total (360)

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Processing information

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Processing information

Banking / Investing (42%), Analyst (45%), Head of desk (58%), Trader (35%)

“43% of respondents believe traders will struggle to handle the increasing

data volumes from social media sentiment analysis”

Q6. Do you think trading firms will struggle to handle increasing data volumes from social media sentiment analysis?

Base: Total (360)

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Speed of processing will be of equal or more importance for social media

Q5. How important will the ‘speed’ of processing information be for social media trading strategies compared to High Frequency Trading? Base: Total (360)

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The future for sentiment analysis

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The future for sentiment analysis

54% agree (26% strongly agree) that firms adopting algorithmic trading strategies based on social media

sentiment analysis will be under closer scrutiny from regulators

Banking / Investing (54%), Analyst (60%), Head of desk (65%), Trader (38%)

Q7. To what extent do you agree or disagree with the following statement: “Firms adopting algorithmic trading strategies based on social media sentiment analysis will be under closer scrutiny from regulators.” Base: Total (360)

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The impact of employing Twitter sentiment analysis

Q8. Do you think algorithmic trading strategies employing twitter sentiment analysis would result in an improvement in the overall quality of information and decision-making process relating to financial trading? Base: Total (360)

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42% think sentiment analysis is a passing fad

Q9. To what extent do you agree or disagree with the following statement: “Sentiment analysis is just a passing fad and will never be a permanent fixture in the world of trading.” Base: Total (360)

© 2010 Colt Technology Services Group Limited. All rights reserved.

Social Media & Trading

February 2013