The Ontario Securities Commission (OSC) has published Staff Notice 11-796, Digital Engagement Practices in Retail Investing: Gamification and Other Behavioural Techniques. In the report, the regulator discusses a randomized controlled trial it conducted to assess the impact different gamification tactics have on investing behaviour.
They add that platforms may influence retail investor decision making in a way that impacts outcomes, both positively and negatively. Two tactics the study examined included giving investors points for buying or selling stocks and showing investors a list of top-traded stocks.
The experiment found that participants who were rewarded with points for buying and selling stocks made 39 per cent more trades than the study’s control group, even though the points had inconsequential economic value. “On average, trading more frequently has a negative impact on investor returns,” they write, adding that this is amplified in a low or no commission trading environment which has caused investor trading volumes to grow considerably.
Participants who saw a list of top trades, meanwhile, were 14 per cent more likely than the control group to buy and sell the top-listed stocks.
“The study’s findings will assist the OSC, as well as other regulators and stakeholders, to better understand the use of gamification and other behavioural techniques,” they write. “The findings reinforce the importance of using behavioural science as a policy tool by regulators.”
It adds that the OSC expects platforms will use this knowledge to focus on techniques that support good investor outcomes.
