OSC's new tool lets investors experience how gamification influences their trading behaviour in real time
The Ontario Securities Commission (OSC) has released a new report examining the influence of gamification on investors.
Alongside this research, the OSC launched a new tool, GetSmarterAboutTrading.ca, which allows users to test how online gamification tactics impact their trading behaviour through a simulated stock market.
The report, Gamification Revisited: New Experimental Findings in Retail Investing, investigates whether promoting certain assets on digital investing platforms poses risks to investors. The tool helps users experience gamification techniques to better understand their potential influence on trading decisions.
“Digital investing platforms are increasingly popular and make it easier for retail investors to participate in financial markets, but there is growing regulatory concern over the use of gamification techniques on these platforms,” said Leslie Byberg, executive vice president, Strategic Regulation at the OSC.
“The research we published today, along with the GetSmarterAboutTrading tool will help people better understand the impact of gamification techniques on their trading behaviour and help investors make more informed decisions.”
The OSC's experiment involved participants receiving virtual ‘money’ to invest in fictional stocks on a simulated trading platform. Stocks were promoted in various ways, and the results showed two types of promotion significantly impacted trading behaviour.
Participants who saw promoted stocks in a social feed traded 12 percent more, while those with the option to copy trades from a ‘high-performing’ user traded 18 percent more in promoted stocks.
The findings indicate that social engagement techniques can influence investors, often leading to increased trading of specific assets. This behaviour could result in negative outcomes, such as under-diversification or excessive risk-taking.
This latest report builds on an earlier OSC study, Digital Engagement Practices in Retail Investing: Gamification and Other Behavioural Techniques, from 2022.
That report revealed that participants rewarded with points for trading made 39 percent more trades, and those exposed to ‘top-traded list’ were 14 percent more likely to trade. Frequent trading was generally linked to poorer investment returns.
The OSC's research highlights the importance of evidence-informed securities regulation. It also offers several recommendations for Canadian and international regulators on responding to the ongoing use of digital engagement practices by investing platforms.
Potential regulatory updates and limits on problematic practices that may harm investor protection are among the suggestions.
This launch coincides with Investor Education Month in Canada and World Investor Week, which runs from October 7-9. The OSC's efforts aim to raise awareness of investor education and protection during these events.
