Capital markets must rule on instant messaging use

31 Jul 2003

While stock market wheelers and dealers have been trading company information and stock tips on email and financial message boards over the internet, the growing use of instant messaging (IM) and speed with which information is shared should prompt concern amongst market regulators, IDC has said.

According to the analyst firm, regulators such as the Securities and Exchange Commission need to come up with regulations for ethical use of IM. Financial Insights, an IDC subsidiary, has found that IM is quickly becoming an integral part of traders’ daily communications with clients, colleagues and counterparts.

However, to date uptake has been haphazard at best, with many traders using commercial IM platforms that do not permit their firms to capture and archive the communications.

In a report entitled “Instant Messaging on Wall Street”, Financial Insights urges securities firms to control their traders’ IM communications, while leaving this channel open to customers.

Securities firms, it says, should prepare for upcoming regulations regarding IM and how its providers such as AOL and Yahoo! Messenger could interact with a firms’ IT system and its use by employees.

“IM is becoming as common as email, but firms cannot permit their staff to just sign up for AOL or Yahoo! Messenger and be done with it,” said Damon Kovelsky, analyst in the Capital Markets Trading Group at Financial Insights.

“As with any technology that facilitates the daily operations of a securities firm, a firm must be aware of two things: the regulations affecting its use of IM, and the technology needed to ensure that these regulations are being followed.”

By John Kennedy