Section I: Overview

An increasing portion of investors report that social media content directly impacts their investing decisions, and social media is particularly popular among younger generations of investors.⁵ Social media platforms may provide a faster and more efficient way to disseminate financial information that is in line with the preferences of younger generations. Social media also has the potential to drive collective action in a broad and impactful manner.⁶ This was demonstrated in part by the influence of social media on “meme stock” trading activity.⁷

Some financial institutions use social media to help provide general investment information and to market their firm’s services.⁸ In addition, some market participants—including FINRA member firms, exchanges, hedge funds and other financial institutions—view social media as a source of valuable and actionable data that allows them to improve their understanding of the markets.⁹ For instance, techniques such as social media data aggregation are used to gather and consolidate social media posts into a single, centralized hub, and then process the data to help identify and analyze social sentiment. This social sentiment is frequently used as an alternative form of data to inform market research and, ultimately, investing strategies. For example, market participants may rely on these types of social media tools to measure public perception, both for brand management of their own institution and to gauge market trends.¹⁰