As volatility across the capital markets shows no sign of let up, expert speakers at the JSE SA Trade Connect conference on Thursday unpacked the real consequences of its persistence.
Questioned as to whether from a trading venue perspective volatility is considered a positive, Alicia Greenwood, director of post-trade services at the JSE, asserted that it’s something which the exchange thrives on, particularly when one considers the full value chain.
“We are moving toward a much better ability to cope with volatility as we build out our data sets, as we connect them from previously disparate sources. I think our ability to interpret that data quickly and respond as quickly as possible is really what it’s about.”
“Managing volatility for all of us is just becoming more and more part of our fabric. The days of the single black swan are long gone – there’s a flock of black swans coming at you, and it’s persistent.”
Salvador Rodriguez, EMEA head of global execution services at Instinet Europe, further echoed the notion of embracing volatility – especially in light of its inevitability, adding that ensuring the tools at your disposal remain of high quality is a priority.
“It’s about how you react to it and how you adjust how your systems cope with it,” he asserted.
“You have to continue to invest in platforms and infrastructure to remain robust. This year, just for our US business, we’ve had our top five all time volume gains in terms of messaging in the system – that’s billions of messages. To be able to cope at all times, you need that robustness in your platform.”
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Speaking from his perspective at a data and analytics-focused firm, Paul Humphrey, chief executive, BMLL, highlighted the fact that increased volatility in essence translates to increased complexity across the market – with more and more material needing to be processed.
“When I was a broker, I loved volatility. As things moved, volatility was our friend. I think these days, if you leave aside all the risk elements, it just brings more complexity to the marketplace and grappling with the information is a challenge.
“One thing’s for sure, the more firms understand the market microstructure of the venues they’re trading on, the more they trade on them. We see real evidence of that. When it comes to commenting on volatility, we know our place in the marketplace. We know what our part to play is in that.”
When it comes to the role of volatility in shaping market strategies, Cyril Bosch, senior product manager, FTSE Russell, shared what he’s seen from his seat, pointing to the empirical ways in which global asset managers are adapting.
“We’ve got a very good view of what global asset managers are doing because we help them with a lot of research, with a lot of simulation and product innovation development.
“We’ve seen how they’ve shifted into alternative weighting schemes in global benchmarks, how they’ve moved away from concentrated US high valuation, and how they’ve really rotated out of that growth trade into more value – away from developed markets, perhaps into more emerging markets. Having seen that, we can see that people are responding very quickly, both on the equity side, but especially on the multi-asset side.”