Written by Brandon Wong
Given recent market activity, it is perhaps unsurprising that the European Securities and Markets Authority (ESMA) has published a statement outlining the risks connected with trading decisions based exclusively on exchanges of views, informal recommendations and sharing of trading intentions through social networks and unregulated online platforms.
ESMA stated that it could not rule out similar episodes of very high stock volatility in the EU, as seen recently in the US.
Though ESMA welcomes increased participation of retail investors in stock markets, it encourages investors to gather information from reliable sources and to keep in mind investment objectives and the ability to bear losses.
In its statement, ESMA notes that discussing the opportunity to buy or sell shares of an issuer does not constitute market abuse, however organising or executing coordinated strategies to trade or place orders at certain conditions and times to move a share’s price could constitute market manipulation.
When posting information on social media and online platforms, special care should be taken to avoid disseminating false or misleading information, and when disseminating investment recommendations through media generally, as they are subject a number of regulatory requirements.
The statement finishes by outlining that ESMA and the National Competent Authorities will continue to analyse market events and consider adopting further initiatives to preserve investor protection and market integrity as appropriate.