The Tweet heard round the Exchange Social Media and the Financial Markets Innovation Friday August 17, 2012
The Power of Social Media Commodity Analyst Phil Flynn of Price Futures Group notes, “a well-‐placed story can move the market.” “Social media is the most unveriﬁed information source in the world but the news media believes it because of its need for speed,” Italian Journalist Tommaso De Benedetti said.
Crude Oil Futures • A person claiming to be Russian interior minister Vladimir Kolokoltsev tweeted at 9:59am that Syrian President Bashar al Assad was killed: • The three tweets garnered over 1,000 retweets in minutes.
Crude Oil Futures • Between 10:15 and 10:45am, future prices for West Texas Intermediate rose from $90.82 to $91.99 a barrel on the NY Mercantile Exchange. • During the same time, Brent crude also spiked from $108.10 to $109.50. • Once it was realized that the information was false and not connected to the Russian Interior Ministry, the price of WTI settled back. • The fake tweets were eventually revealed to be the work of Tommaso De Benedetti, an Italian Journalist who aims to expose the unreliability of the social media by posting fake tweets about celebrity deaths. Informa(on from h+p://online.wsj.com/ar(cle/SB10000872396390444246904577573661207457898.html
Netﬂix • After the market closed for the Independence Day holiday, Netﬂix CEO Reed Hastings mentioned in a Facebook post that the company delivered a record 1 billion streams in June. “Congrats to Ted Sarandos and his amazing licensing team. Netﬂix monthly viewing exceeded 1 billion for the ﬁrst time in June. When ‘House of Card’ and ‘Arrested Development’ debut, we’ll blow these records away. Keep going Ted, we need even more.” • During the next day of trading, the share price of Netﬂix jumped 13.4% to $81.72. • Since then, the stock has fallen 20% -‐ now trading at $65.04.
What does this say about Social Media? • Its powerful – Beyond reporting the news, posts on social media have the power to move ﬁnancial markets. • It can be unreliable – In the case of crude oil prices, the message moved so quickly that there was no time to substantiate or verify the news. • It can magnify messages – For Netﬂix, the multiplication power of a Facebook post enabled the news to seem more positive and substantial than it actually was. • It will be increasingly legislated – With the new power of social media, courts will provide laws demanding the truthfulness of content.
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