Taking stock of social finance

10 Dec 2013

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On 23 April this year, a tweet from the official Associated Press Twitter account read, “Breaking: Two explosions in the White House and Barack Obama is injured.” The more savvy among @AP’s more than 2.7m followers spotted this was a hoax; the result of a hack for which the Syrian Electronic Army claimed responsibility.

Yet this errant tweet was still enough to cause the Dow Jones industrial average to drop sharply by 143 points. In the few minutes it took for the Twitterati to expose the bogus report, the market quickly bounced back, and that downward spike on the index is the visible territorial marking of ‘social finance’.

Essentially, social finance describes the point where traditional finance meets social media, particularly in terms of how people consume or follow the day-to-day, moment-to-moment news flow of financial markets.

StockStreams

Working at this confluence, StockStreams attempts to leverage an active community of largely independent individual contributors to provide a different perspective on the traditional news flow around markets.

“We’re very Twitter-centric at the moment, only because Twitter is the most effective data source," said Andrew Quinn, co-founder and CEO.

Preparing for a full public launch in January 2014, StockStreams allows users to create a personalised financial news wire, concentrating on the information that’s relevant to them.

Quinn founded the company with Kirk Donohoe, COO, in 2012 – the same year Twitter began rolling out clickable stock symbols, or ‘cashtags’ on the platform. Like the everyday Twitter hashtag, cashtags connect tweets that are part of the same conversation by hyperlinking text any time the dollar sign is followed by a company’s ticker symbol. For example, $AAPL could be used in tweets about Apple’s stock performance.

For about 18 months now, StockStreams has been collecting data from tweets containing cashtags from the Twitter accounts of about 2m active and influential members of the online financial community. Each of these sources is ranked by importance and opinions are weighted accordingly. "We don’t consider every tweet in that conversation as having the same relevance," said Quinn.

The idea is that StockStreams can empower users to make decisions based on the social conversation around stocks they have an interest in. As Twitter is now often a medium in which news breaks, StockStreams can, in theory, inform its users in advance of the usual channels.

“The patterns of tweets that we see are not necessarily always very well correlated with price movements," said Quinn. "You frequently see the community start to talk about a stock and the price isn’t moving. Then – it could be the next hour, it could be the next day, it could be the next week – the price moves, because the market doesn’t consume information in a totally rational, linear way."

Information overload

Andrew Quinn

Andrew Quinn, CEO of StockStreams

In September, Felix Salmon, noted financial journalist and current financial blogger for Reuters, said, "Twitter is just as important as a Bloomberg [Terminal] now, and a hell of a lot cheaper." Of course, he made this bold statement via tweet.

Bloomberg Terminals provide real-time financial data and there are already tools like TweetDeck that can filter conversations on Twitter. StockStreams is like a combination of the two; a tailored solution for following the real-time conversation of the financial community. As well as streams of tweets, users can also see what Quinn calls the "ripples and waves" as well as the "big crescendos of noise" coming from activity around a certain stock, visualised in graphs and charts.

With 350,000 tweets sent per minute on Twitter, it’s easy to get swamped with information. "The human brain is just not capable of consuming that type of constant information," said Quinn, who believes the data visualisations provide a much more immediate sense of what’s going on.

Power to the user

StockStreams puts the power of information in the hands of the user and leaves interpretation up to them. Not only does this democratise the market, it can also help to steady the types of knee-jerk reactions that followed the Associated Press hack. What happened in this case is that an analytics engine called Dataminr pushed an alert to clients immediately, but a more measured approach to breaking news could have prevented the Dow Jones dip.

“We certainly wouldn’t have been flagging [the bogus tweet] as something you should act on," said Quinn, for whom this episode highlights a broader problem with the market that StockStreams is trying to address.

“People constantly have their finger on the trigger reacting to news, and even the way a lot of the media reports financial news is constantly trying to push people into action," he said. "What you need to do is just brace yourself, be well prepared and understand basically everything that’s going on around the investments that you are involved in, and then, when news inevitably does or doesn’t break, you can use that as an advantage."

A version of this article appeared in The Sunday Times on 8 December

Financial data image via Shutterstock

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Elaine Burke is managing editor of Siliconrepublic.com

editorial@siliconrepublic.com