Sylvain Thieullent, chief executive of Horizon Trading Solutions explores how traders can navigate volatility and its ripple effects as periods of turbulence become increasingly prominent across the markets.
Volatility is no longer an infrequent storm. It’s the new normal. From the pandemic shock in March 2020 to the recent ‘Liberation Day’ sell-off, markets have learned that turbulence isn’t an anomaly – it’s a constant threat.
Every bout of volatility exposes the same weak points in trading infrastructure as liquidity dries up. Yet each episode also reveals something deeper – a divide between firms that can adapt in real time and those that can’t. In this environment, the competitive edge no longer lies in the ability to trade in microseconds but in adapting.
Volatility has changed shape
The volatility of the past few years is different from that of previous cycles. It moves faster, spreads across the globe, and is more interconnected. Political events, regulatory shifts, or even social-media-driven sentiment can trigger sharp market reactions in seconds.
Take the July 2024 US CPI surprise. Within minutes, equity options volumes surged by more than 40%. Firms with adaptable systems rebalanced their hedges and liquidity sourcing dynamically. Others found themselves stuck in execution queues or frozen out of fragmented order books.
An important factor in this is retail participation. In just under two months, it will be five years since the GameStop incident saw retail traders force the hand of multiple hedge funds. That was not a one-off event but the start of a new order.
Retail investors are now a major force in market liquidity, and exchanges and institutions are actively encouraging this participation. Digital trading platforms, like eToro and Robinhood, have reshaped access to markets. By attracting younger, smartphone savvy investors and internalising part of the order flow, they’ve transformed how liquidity circulates. As a result, market shocks now ripple through networks of retail and institutional players at unprecedented speed, influenced by investment products like zero-day to expiry options.
Liquidity pressure is a technology test
When volatility spikes, liquidity always follows a familiar pattern, disappearing where traders need it most. Bid-ask spreads widen, market depth collapses, and slippage becomes unavoidable. Predicting liquidity in these moments requires both quantitative precision and trader instinct. But it also requires infrastructure capable of ingesting, analysing, and acting on vast data streams in milliseconds.
Too many trading systems still buckle under that weight. They were designed for predictable volumes, not today’s surges across asset classes. The result is traders face a paradox: even with better data, their ability to act on it can be constrained by rigid systems. So, resilience isn’t only about raw execution speed, it’s about whether systems can stretch when volumes spike.
Bridging the adaptability gap
There’s a growing gulf between firms that can evolve and those locked into fixed workflows. The traditional responses to cope in these situations, such as adding speed, buying bandwidth, or fine-tuning algorithms, no longer suffice. What matters now is the ability to adjust strategy and infrastructure as markets shift. That means using trading technology that can scale automatically under load, algorithms that can be tuned intra-day, and workflows that allow traders to intervene intelligently when data deviates from the model.
It also means having trading systems that can adapt to different patterns of liquidity, influenced by changing market dynamics, such as growing retail participation. This will continue to be the case as new innovations emerge, such as predictions markets, 24/5 and 24/7 trading and more tokenised and synthetic products crossing institutional and retail. These are nascent trends, but are sure to have an impact. Traders should be preparing for this now.
In this context, adaptability is both a systems issue and a market behaviour issue. Institutions, platforms, and regulators all need to evolve together to manage this new form of trading and the impact on volatility.
Adaptability as the true measure of strength
Market participants have spent years pursuing ever-lower latency, but the next era of performance will be defined by adaptability. The firms that thrive will be those whose systems evolve continuously, as conditions demand.
Volatility isn’t going anywhere, so the challenge is no longer to endure it but to design for it. That means treating adaptability as a strategic discipline, embedded in architecture, workflows, and trader behaviour.
In the end, resilience isn’t about surviving the next shock. It’s about building systems and teams that turn volatility into opportunity. In financial markets where change is constant, adaptability is the new alpha.