Nearly 80 per cent of broker/dealers are using instant messaging, according to new research from TowerGroup. The consultancy says a few traders and their clients are even starting to use instant messaging in the transaction cycle, to pass on market-critical information such as indications of interest and, in some cases, even orders and trades.
This rapid growth in instant messaging has attracted the attention of regulators such as the NASD, says TowerGroup. In June this year, the NASD stipulated that broker-dealers must retain instant messaging records for at least three years, which has prompted brokerage firsm to assess needs, set policies and implement systems to control, monitor, detect and analyze use of instant messaging.
TowerGroup says that, while regulatory categorization will give instant messaging additional credibility and to enlarge usage, it also raises questions about how best to use the technology. Its new research report – entitled “Instant Messaging: Does Regulatory Categorization Create An Opportunity In The Transaction Process?” – examines the implications of new regulations on the use of instant messaging by front-office traders; the current and potential use of instant messaging for trading information internally and externally; and the risks and limitations of extending instant messaging for orders and trades.
The report was written by Miranda Mizen, a senior analyst in the Securities and Capital Markets practice at TowerGroup.