The spectacular rise of Twitter has been a marketing boon for tech-savvy A-listers and big consumer brands alike, from pop diva Lady Gaga and President Barack Obama to Starbucks, the NBA and JetBlue Airways. Financial services firms have mostly sat this revolution out. But there are two notable exceptions: the Chicago Board Options Exchange, which boasted 763,030 Twitter followers as of mid-September, and CME Group, which had 759,892 — enough to place both exchange operators among the top 300 most-followed Twitter accounts worldwide.
What explains this micro blogging success story? In brief: traders’ need for speed. Twitter’s rapid-fire, 140-character messages have proven ideal for squeezing a lot of actionable information into a tiny space, including shortened links to pertinent articles and web pages. That makes Twitter the perfect medium for commodities, futures and options traders looking to share breaking news, swap ideas with like-minded investors and source data before it hits the wires, whether it’s a Midwestern farmer tweeting about crop yields or a currency strategist commenting on a move in the dollar-yen exchange rate.
That’s where the Chicago exchanges come in. They have carved out a niche on Twitter by adding to the real-time flow of conversation. Allan Schoenberg, director of corporate communications at CME Group, personally mans the exchange’s Twitter account, @CMEGroup, which was set up in August 2008, and sends anywhere from a handful to a dozen tweets a day. He says the microblogging platform is useful for promoting his brand, tracking issues of importance and even fielding customer feedback. By understanding the Twitter audience’s needs, he says, “you can build value for your community that reciprocates into value for your company.”
The exchanges are surprised by their own success. “Like many new to the social media arena, CBOE launched this effort with fairly modest expectations,” says Cynthia Elsener, vice president of marketing and educational services, who oversaw the creation of the @CBOE account in March 2009. “The rapid expansion of followers has been quite a revelation.”
Both exchanges’ Twitter presences have gotten a boost from StockTwits, an online community that organizes tweets about investments. The web site popularized the use of the dollar sign in Twitter messages to designate ticker symbols for stocks, currencies and options and futures contracts, making it easier for traders to swap information about their most popular products, such as the CBOE volatility index ($VIX) and CME Group’s E-mini S&P 500 contract ($ES_F).
Traders say Twitter is addictive — and indispensable. Joe Donohue, an early investor in StockTwits who is based in Morristown, New Jersey, and manages $7 million in separate accounts for high-net-worth individuals, began using the microblogging platform a few years ago to share trading ideas and track the real-time flow of information. “If I’m long or short Apple, I can look at that stream and somebody out there in the hinterland has found something and put it on Twitter,” he explains. “I’ve never had an experience where that wasn’t valid information.” Donohue, who has worked on Wall Street for 25 years and co-founded a hedge fund firm now called YA Global Advisors, tweets using the handle upsidetrader (the name of his blog) and has amassed more than 9,000 followers.
“The only way to be more current is to spend $25,000 to have a Bloomberg terminal on your desk,” he contends.
This point underscores what may be Twitter’s most important legacy in the financial world: its potential to level the playing field for different types of investors — big and small, novice and professional — by providing easy and inexpensive access to real-time information and a soapbox for previously undiscovered investment talent.
Coronado, California–based StockTwits, whose mission is to help investors find and track the best tweets about investments, is hastening this revolution. “We believe in new faces,” says co-founder and CEO Howard Lindzon. “It’s a more distributed model of leadership.”
Nonetheless, there’s at least one aspect of Twitter at which the pros still have an advantage: using software to scour the more than 90 million tweets broadcast every day to uncover trading signals. Mark Palmer, CEO of Lexington,
Massachusetts–based StreamBase Systems, which helped pioneer technology capable of processing thousands of information sources in real time, says that roughly a fifth of the firm’s 75 money management clients are using his product to analyze digital content. Thanks to an enhancement introduced last year, the software is now capable of analyzing tweets. Buying on the rumor and selling on the news has never been easier — or more scientific.
