In the wake of instances of social media influencing the capital market, global grouping of securities market regulators IOSCO will look into the issue and deliberate on ways of using such platforms to protect the interest of investors.
The plan to discuss the issue of social media comes against the backdrop of a recent fake message on microblogging site Twitter which led to a sharp sell off in the American stock market.
“We will look at how this idea (of social media) affects capital market and how well it can be used to protect the interest of investors,” IOSCO (International Organisation of Securities Commissions) Secretary General David J Wright said here.
The influence of social media is also a matter of behavioural economics, he added.
According to him, the issue is expected to be discussed at the next meeting of IOSCO members, to be held in Montreal in June this year.
SEBI (Securities and Exchange Board of India) is part of IOSCO.
A fake tweet saying that US President Barack Obama was injured in an explosion at the White House, last month resulted in panic selling of American stocks and going by estimates, about market capitalisation worth $130 billion was wiped off.
Wright was speaking on the sidelines of a public seminar organised by the Asia Pacific Region Committee of IOSCO here.
The event also saw discussions on the topic of innovation in financial sector and regulations.
IOSCO Chairman Greg Medcraft said that innovation in financial sector also results in complexities, mainly those related to products, market and technology.
“We need to make sure that regulators respond quickly to innovation,” he said.
Speaking on the topic, National Stock Exchange’s Non-Executive Vice Chairman Ravi Narain said that it cannot be assumed always that there is “trade-off” between innovations in financial sector and regulations.
He also emphasised that risk tolerance of the system is important while coming up with innovations.
Securities Commission Malaysia’s Chairman Ranjit Ajit Singh said financial innovation has helped in creating a lot of value for investors. However, he noted that high standards of risk management should be in place while implementing innovation in the sector.