The Ontario Securities Commission (OSC) released a report examining the effects of gamification on retail investors and introduced a new trading simulation tool designed to help users better understand the influence of digital engagement techniques on their investment decisions.
The report “Gamification Revisited: New Experimental Findings in Retail Investing” investigates how promoting specific assets on digital trading platforms can pose risks to investors. Alongside the report, the OSC launched GetSmarterAboutTrading.ca, an interactive platform where individuals can practice simulated trading while experiencing various gamification tactics. The goal is to demonstrate how these techniques might impact their investing behaviour.
“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 of 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 conducted an experiment where participants received virtual funds to invest in fictional stocks on a simulated trading platform. The study analyzed the effects of promoting certain stocks using different digital engagement practices. The findings revealed that when promoted stocks appeared on a social feed, participants traded those stocks 12 percent more frequently. Additionally, users who could replicate trades from a “high performing” investor traded 18 percent more in those promoted stocks.
According to the OSC’s findings, these social engagement strategies can encourage increased trading in specific assets, potentially leading to negative consequences such as under-diversification or heightened risk exposure. The report builds on a previous 2022 OSC study, which demonstrated that gamification elements like “points” and “top-traded lists” could drive more frequent trading, often resulting in lower investor returns.
The OSC underlined the importance of an evidence-based approach to securities regulation. The report recommended updates to regulations and guidelines for online trading platforms to safeguard investors, including potential limitations on digital engagement practices deemed problematic.
This initiative aligns with the start of investor education month in Canada and the upcoming World Investor Week from October 7-13. Through these efforts, the OSC aims to raise awareness about the significance of investor education and protection.