Finance Monthly - December 2021

40 Finance Monthly. Inve s tmen t Trading has never been more fun In principle, to ‘gamify’ means to map the mechanics of video game playing onto non-gaming scenarios. As The Conversation writes, game playing influences creativity and learning because it can “lower the barriers of established behavioural norms and routines by offering new rules and sometimes even new realities”. However, the increasing accessibility of trading due to this added fun factor is being blamed for its destabilising influence. A new generation of young traders has emerged, riding the exciting riptide of market volatility in the same way they would from playing Call of Duty, only with little capital investment. Digital trading platform Robinhood Markets, for instance, popularised stock market trading through in-built reward systems. Critics of gamification allege that it nurtures an addiction to trading the markets, while simultaneously minimising the dangers and hence distorting the reality of market trading. Robinhood has consequently removed some of its game-like interface features, such as confetti and lottery-like scratchcards, which allegedly incited inexperienced investors to trade the markets in a trivial way that encourages excessive risk- taking. However, these features were defended by Robinhood as a way to “cheer on customers through the milestones in their financial journeys”. By August 2021, the US Securities and Exchange Commission (SEC) began an inquiry into these practices, claiming that they were being used by online brokerages and advisers to encourage people into trading more stock and other securities thereby overtrading their accounts. A social dilemma Encouraging younger investors into the market with game-like features is not limited to trading apps. For those with even the most cursory understanding of the stock market, the impact of social media on investor trading has not gone unnoticed, as the GameStop saga highlighted. Dubbed ‘the Reddit revolt’, amateur investors used social media to influence the share price of GameStop, a bricks- and-mortar video game retailer. Members of a forum, named WallStreetBets, clubbed together to collectively buy shares in this faltering company, pushing up prices astronomically and forcing short sellers to buy back their positions in an attempt to limit their losses. Social media was used to intensify trends and information exchanges, and the companies targeted were subsequently referred to as “meme stocks”. In one stroke, these Redditors sent a message to the hedge funds that were short- selling undervalued underdog businesses. What’s more, by codifying market rules in a David vs. Goliath, game-like battle, much of the complicated jargon around trading was stripped away. Who holds the key to the future? The distinction between social media’s influence and gamification is not so clear-cut. Robinhood was the app used by many of these savvy, Average Joes to upend the “Critics of gamification allege that it nurtures an addiction to trading the markets, while simultaneously minimising the dangers and hence distorting the reality of market trading.“