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Barring Social Media and Mobile Apps from Stock Market?

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It is undoubtedly true that the mobile phones have taken a toll over the global economy development. The world is no more a big place and people can now contact any person staying miles away in a matter of seconds. Mobility has improved at large. The use of smart phones, tablets have been increasing manifold. Short messaging services like BBM/Whatsapp are used extensively by people to stay connected. Recently in a survey it was found that large scale use of messaging services like BlackBerry Messenger (BBM) and WhatsApp are done by manipulators. These applications are used as a medium to spread sensitive information about stock target, which at the end is resulting in a speculative environment.

Usage of Social Media services in Stock Market

The capital market regulator in India, the SEBI has announced several steps which are being taken to check the risks being posed by these new-age mobile applications. SEBI has reported that it is in the process of implementing software tools to check and analyse the discussion pertaining to stock market on the social media. The market regulator, to strengthen its probe and oversight on capital market, has tied up with several IT experts. This will help SEBI understand the current picture in a better manner.

As far as the applications of messaging services are concerned, it is becoming difficult for SEBI to track the source of such information. Applications like Whatsapp and BBM are too tricky, given the multi-level difficulties faced in tracking source (epicenter) of market sensitive information.

These mass messaging problems are adding to the woes of the market regulator as the transmission of messages in these platform use internet. Use of internet encodes the messages in a complex manner which is difficult for the third party to decode.

Manipulation of Stock Prices using Social Media

The market manipulators/speculators have been using the social media like Facebook/twitter/Blogs etc. in a big way to influence the price of stocks. False word is spread as news for different stocks by people using a fake id which is thought as a tip by common man. People have now moved to easy means of spreading messages. The use of blog, etc has reduced given the fact that these platforms could be easily tracked due to their highly public nature.

The free messaging services available on the platforms of BBM/Whatsapp etc. have added attractiveness among the speculators as these medium are comparatively fast and easy.

Also Read Social Network strategy for Companies and its Importance.

SEBI is finding it difficult to track the data related to the call records from telecom companies. Tracking of messages from these mobile apps seems impossible. SEBI also pointed out that these applications are increasingly used for insider trading. SEBI’s investigations into number of insider trading cases recently has unveiled that the used of apps like BBM and WhatsApp are increasing among people. SEBI has hired IT specialists to check the transfer of information through these medium.

SEBI wants to stop free flow of false information using Internet & Mobile device services

It is expected that in near future, the market regulator will come up with certain regulations to prevent the use of mobile phones from manipulating the market. The Social media platforms have become an effective place to spread information in real time and are being used by various scrupulous elements in the stock market.

Development of free websites giving stock tips have also increased manifold. People uses fake charts about the stock movement which is aimed to attract the common people towards their prediction. These problems have been taken up by SEBI, which is soon going to create a ban on the use of leading social media platforms and websites to support such discussion related to stock market.

Conclusion

At last we can say that the market watchdog is currently determined to bring a new wave of development and transparency in the market. This will definitely help safeguard the interest of retail shareholders. These reforms when implemented will ensure that the market is driven primarily based on one’s fundamental and technical analysis.

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Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

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