New channels of electronic communication have been a boon to many industries, opening up sales and marketing opportunities, helping improve customer service and speeding up innovation and collaboration. For Wall Street, however, the benefits of technology such as Twitter have to be weighed against the compliance pains.
Twitter, launched by San Francisco-based Obvious in late 2006 before being spun off, is a cross between an online discussion board and instant messaging system, allowing people to post short updates-capped at 140 characters-on their activities. Users can subscribe to each other's updates, or tweets, and have them sent to their Twitter screens. Some Twitter posters develop armies of followers.
Early adopters, as with most other social media platforms, were primarily teenage girls and the technology obsessed. But usage has spread quickly in recent months-the platform regularly grinds to a halt due to heavy traffic-and Twitter, with its powerful community-creation mechanism, is becoming widespread among groups such as venture capitalists, journalists and stock traders.
Because members select the people they want to follow, Twitter communities are self-organizing. Twitterers can see who the users they follow subscribe to and follow them as well. If a particular user is particularly annoying, one click makes them vanish from your screen.
Twitter users often link to news items or blog entries, discuss issues of mutual interest, spread gossip and provide coverage of events in real time. For Howard Lindzon, partner at Toronto-based hedge fund Knight's Bridge Capital Partners, Twitter is both a useful research tool and a way to share information with a closed network of friends. A major attraction of Twitter is that, unlike securities trading message boards, "it's not spam-filled, with people talking about penny stocks," says Lindzon. "It's really a closed conversation with people." Lindzon is so enamored with the platform that he created StockTwits, a service that searches for Twitter postings that mention stock symbols. "We're creating an aggregator where people can listen in on what people are saying," he says.
Timothy Sykes, a former hedge fund manager and author of "An American Hedge Fund," is another proponent of Twitter. Sykes did not use Twitter when he ran Cilantro Fund Management. But today he uses Twitter to promote his blog, which offers investment advice "for entertainment purposes only," and for research. Sykes says he follows the tweets of about 400 users, including stock traders and fund managers.
"You can get a sense of what people in the industry are thinking," he says. "I would guess that there are thousands-or tens of thousands-of financial industry professionals who are not using their real names and following people," says Sykes.
If Sykes was working for a big Wall Street firm, he wouldn't be actively Twittering. "I definitely would not risk my company finding out, or the SEC coming down on me," he says. "Someone could lose a lot of money because of your tweets. I wouldn't risk it." Instead, he would restrict his use to pure research, in a read-only mode. The Securities and Exchange Commission also uses Twitter, adds Sykes-to send out advice to retail investors.
As with other communication technologies that have proved useful-if short on security-in their public forms, vendors are working on enterprise-friendly, compliant versions of the platform. In addition to a variety of open-source projects, development efforts are under way at IBM Corp. and start-ups Brainpark and Workstreamr.
Until those solutions are released, vendors like Belmont, CA-based FaceTime Communications can help a company block Twitter and similar systems from desktops, though they can't do much about personal laptops or cell phones. "In terms of Wall Street and the financial sectors, it's a little early for those industries to adopt this particular kind of technology," says Christopher Boyd, senior director of malware research at FaceTime. "They're probably still wondering exactly how they can use Twitter."
Many companies have a blanket prohibition against posting work-related material on social media platforms, enforcing it through a combination of blocking tools, company policies, education and direct monitoring. That's the case at VSR Financial Services, the second-largest broker-dealer in Kansas. According to VSR president Chris Radford, the firm permits usage of Twitter and social networking sites for research purposes but not for outgoing or internal communications.
Interest in online communications has been picking up among reps, he adds. "We just had a national conference here and a majority of our representatives were asking about electronic communications-blogging, MySpace, Twitter," he says. "We want to support the growth of sales. We want to support the acquisition of new assets-and we do that several different ways. But we also have a requirement to supervise the communications with the public and archive those communications."
If Twitter and its clones continue to grow and become more useful-which isn't certain, given that there are no current revenue streams for the products-firms may eventually have no choice but to embrace the technology. Enterprise collaboration and communication vendors including Microsoft Corp., Oracle Corp. and IBM may include Twitter-like tools in releases of their messaging products. IBM has already deployed the BlueTwit micro-blogging platform for its own employees.
San Francisco-based Brainpark is developing an enterprise-level version of Twitter. The company currently offers a hosted, on-demand version of the software, Synapse, hosted in a secure facility with offsite backups. In the next few months, it plans to roll out compliance functionality, including archiving, monitoring, identity management and keyword alerts, says company co-founder and CEO Mark Dowds. Brainpark can also build onsite implementations for firms that want to keep all their communications behind a corporate firewall, adds Dowds. (c) 2008 Bank Technology News and SourceMedia, Inc. All Rights Reserved. http://www.americanbanker.com/btn.html/ http://www.sourcemedia.com/