Because the 2024 US presidential election approaches, the market is bracing for excessive volatility, which may current important challenges for brokers, notably by way of liquidity administration. Finance Magnates spoke with business consultants to know how brokers are getting ready for potential market disruptions, and the way liquidity points may result in worth spikes, outages, and different dangers.
The 2024 US Election: How Volatility Impacts Liquidity
“Liquidity points are inclined to come up throughout information occasions that set off surprising volatility,” mentioned Jonathan Brewer, Chief Income Officer at GCEX, when discussing with Finance Magnates the attainable affect of the upcoming US elections on the brokerage enterprise. “This specific election may end in excessive volatility, which can result in liquidity challenges for brokers who haven’t fastidiously curated their liquidity.”
Jonathan Brewer, Chief Income Officer, GCEX
“Poor liquidity administration may end in worth spikes, outages, and even, in excessive instances, misguided liquidations of shopper positions,” he added.
Trump vs Harris: Market Expectations and Volatility
The US Presidential election is scheduled for November 5, 2024, which is lower than three weeks away. Nonetheless, not like earlier elections, the race between former President Donald Trump and present Vice President Kamala Harris is extraordinarily shut. Such uncertainty usually results in surprising market actions. Apparently, current betting market odds present that Trump is main by double digits.
Trump’s odds proceed to rise.
He is now 24% forward with 15 days to go. pic.twitter.com/PnadLjQxWA
— Polymarket (@Polymarket) October 21, 2024
“Trump is seen as extra ‘market-friendly’ than Harris,” mentioned David Morrison, Senior Market Analyst at Commerce Nation. “Buyers really feel he understands enterprise and has persistently supported low taxes and low rates of interest. If he have been to win, the greenback would possibly drop, whereas valuable metals and equities may rise, no less than initially.”
David Morrison, Senior Market Analyst at Commerce Nation
Nonetheless, if Harris wins the election, Morrison believes “there could also be some preliminary disappointment amongst traders that Trump didn’t win,” including that on this state of affairs, “the greenback may strengthen, whereas fairness markets would possibly see a short lived sell-off.”
Ernest Yiu, VP of Advertising and marketing at Ultima Markets
However, Ultima Markets’ VP of Advertising and marketing, Ernest Yiu, thinks that “a Harris victory may sign a shift in the direction of extra progressive insurance policies, doubtlessly resulting in elevated regulation and better company taxes, whereas a Trump victory may heighten geopolitical tensions, just like his earlier commerce battle with China.”
Knowledgeable Opinions on Liquidity Challenges for Brokers
Regardless of the shut competitors, the market is predicted to react sharply, whichever aspect wins the election. The US election is without doubt one of the most impactful world market occasions because of the measurement of the nation’s financial system and its worldwide affect.
Chantelle Lea, Regional Advertising and marketing Director at ThinkMarkets
Chantelle Lea, Regional Director of Advertising and marketing at ThinkMarkets, expects “market volatility to lower simply earlier than the vote, adopted by a surge as soon as the exit polls are launched.” In line with her, “The important thing might be to look at the exit polls in swing states, as they are going to have essentially the most affect on the election consequence.”
Tickmill’s Managing Principal, Joseph Dahrieh, famous that “Traditionally, markets are inclined to rally after elections as uncertainty fades and new insurance policies are anticipated.” Tickmill has even launched a hub for merchants to trace US election-specific market volatility, offering information, knowledgeable evaluation, and historic insights.
A number of different brokers have additionally enhanced their market evaluation instruments for merchants, anticipating a surge in buying and selling exercise across the US elections.
This may annoy all these people who find themselves adamant that TA shouldn’t be related to the $VIX pic.twitter.com/54gb5rDF3c
— Chris Beauchamp (@ChrisB_IG) October 16, 2024
Joseph Dahrieh, the Managing Director at Tickmill
“Volatility associated to massive occasions like elections tends to extend commerce volumes, which advantages brokers by means of fee and spreads,” mentioned Ultima Markets’ Yiu. Commerce Nation’s Morrison agreed to this notion and added that “Brokers favor greater volatility as a result of it usually results in lively markets, offering loads of buying and selling alternatives for his or her purchasers. Some brokers widen their spreads when volatility rises.”
Regardless of these benefits to brokers, GCEX’s Brewer mentioned: “Retail purchasers’ buying and selling efficiency is usually inversely associated to market volatility.”
“Robust market actions are inclined to set off important liquidations of retail purchasers, particularly those that overuse leverage or tackle extreme danger,” he added. “Volatility spikes result in excessive buying and selling volumes but in addition to substantial shopper losses. This makes volatility useful for brokers, whether or not they function a risk-based mannequin (B e book) or a flow-based mannequin (A e book / STP / ECN).”
Methods Brokers Are Utilizing to Put together for Volatility
Nonetheless, volatility additionally poses dangers for brokers who’re unprepared. “Excessive volatility is dangerous for brokers as a result of elevated margin calls, potential slippage, and widened spreads,” Yiu famous. Liquidity is one other problem in risky markets, as he identified: “Liquidity suppliers might pull again or widen spreads, making it more durable to execute trades at fascinating costs.”
“The rise in buying and selling exercise requires robust relationships with liquidity suppliers to handle dangers successfully,” mentioned Dahrieh. “Brokers should additionally guarantee dependable expertise to deal with the surge in transactions and keep away from operational failures.”
Brokers ought to work with a number of liquidity suppliers to forestall disruptions throughout risky durations. “It’s important for brokers to make use of a various mixture of top-tier liquidity suppliers,” mentioned Lea. “This ensures constant pricing, execution, and aggressive spreads, even when one or two suppliers withdraw liquidity.”
Apparently, some brokers scale back leverage or enhance margin necessities throughout occasions of skinny liquidity to handle danger, Yiu identified.
“Brokers strategy high-impact occasions just like the US elections by implementing numerous danger administration methods to deal with market volatility, equivalent to setting publicity limits, monitoring market modifications in actual time, and conducting stress checks to determine weaknesses,” mentioned Dahrieh. “As circumstances evolve, they adapt their practices, develop disaster administration plans to keep up operations, and guarantee ample liquidity. Brokers additionally help merchants by bettering danger administration instruments and offering real-time market insights to assist them navigate the anticipated volatility.”
Market Reactions: How Will the Election Affect Buying and selling?
There is no such thing as a doubt that buying and selling volumes enhance throughout risky markets. However how do merchants behave? How do merchants’ sentiments change in risky markets?
Most retail brokers skilled a growth through the risky interval attributable to the COVID-19 outbreak in 2020. Buying and selling exercise surged, and the income of many publicly listed brokers, together with IG Group and CMC Markets, peaked throughout these months.
Though the US election won’t have the identical affect, it may nonetheless considerably affect the market. Information from eToro additionally revealed that 49 % of retail merchants adjusted their portfolios forward of polls.
“With Trump trying to break the mildew, pleasure might be excessive, and we anticipate a surge in new shopper sign-ups, deposits, and buying and selling quantity,” mentioned ThinkMarkets’ Lea.
Nonetheless, Yiu famous, “Most merchants turn out to be extra cautious earlier than main occasions like elections. They have an inclination to scale back publicity, shut positions early, or hedge their positions to guard themselves in opposition to surprising outcomes.”
He added that “some merchants would possibly act in a different way, seizing alternatives by buying and selling short-term within the greater volatility, both by means of scalping or day buying and selling.”
GCEX’s Brewer additionally identified: “EAs, which account for a big proportion of transactions in our market, are prone to commerce very actively and, in some instances, erratically.”
Conclusion: Navigating Volatility In the course of the 2024 US Election
With the 2024 US election anticipated to deliver important market volatility, brokers are taking numerous steps to arrange. By diversifying liquidity suppliers, upgrading expertise, and bettering danger administration instruments, brokers goal to mitigate the dangers of worth spikes, outages, and liquidity challenges. Whereas volatility can current buying and selling alternatives, each brokers and merchants have to be ready for the potential dangers concerned.
Because the 2024 US presidential election approaches, the market is bracing for excessive volatility, which may current important challenges for brokers, notably by way of liquidity administration. Finance Magnates spoke with business consultants to know how brokers are getting ready for potential market disruptions, and the way liquidity points may result in worth spikes, outages, and different dangers.
The 2024 US Election: How Volatility Impacts Liquidity
“Liquidity points are inclined to come up throughout information occasions that set off surprising volatility,” mentioned Jonathan Brewer, Chief Income Officer at GCEX, when discussing with Finance Magnates the attainable affect of the upcoming US elections on the brokerage enterprise. “This specific election may end in excessive volatility, which can result in liquidity challenges for brokers who haven’t fastidiously curated their liquidity.”
Jonathan Brewer, Chief Income Officer, GCEX
“Poor liquidity administration may end in worth spikes, outages, and even, in excessive instances, misguided liquidations of shopper positions,” he added.
Trump vs Harris: Market Expectations and Volatility
The US Presidential election is scheduled for November 5, 2024, which is lower than three weeks away. Nonetheless, not like earlier elections, the race between former President Donald Trump and present Vice President Kamala Harris is extraordinarily shut. Such uncertainty usually results in surprising market actions. Apparently, current betting market odds present that Trump is main by double digits.
Trump’s odds proceed to rise.
He is now 24% forward with 15 days to go. pic.twitter.com/PnadLjQxWA
— Polymarket (@Polymarket) October 21, 2024
“Trump is seen as extra ‘market-friendly’ than Harris,” mentioned David Morrison, Senior Market Analyst at Commerce Nation. “Buyers really feel he understands enterprise and has persistently supported low taxes and low rates of interest. If he have been to win, the greenback would possibly drop, whereas valuable metals and equities may rise, no less than initially.”
David Morrison, Senior Market Analyst at Commerce Nation
Nonetheless, if Harris wins the election, Morrison believes “there could also be some preliminary disappointment amongst traders that Trump didn’t win,” including that on this state of affairs, “the greenback may strengthen, whereas fairness markets would possibly see a short lived sell-off.”
Ernest Yiu, VP of Advertising and marketing at Ultima Markets
However, Ultima Markets’ VP of Advertising and marketing, Ernest Yiu, thinks that “a Harris victory may sign a shift in the direction of extra progressive insurance policies, doubtlessly resulting in elevated regulation and better company taxes, whereas a Trump victory may heighten geopolitical tensions, just like his earlier commerce battle with China.”
Knowledgeable Opinions on Liquidity Challenges for Brokers
Regardless of the shut competitors, the market is predicted to react sharply, whichever aspect wins the election. The US election is without doubt one of the most impactful world market occasions because of the measurement of the nation’s financial system and its worldwide affect.
Chantelle Lea, Regional Advertising and marketing Director at ThinkMarkets
Chantelle Lea, Regional Director of Advertising and marketing at ThinkMarkets, expects “market volatility to lower simply earlier than the vote, adopted by a surge as soon as the exit polls are launched.” In line with her, “The important thing might be to look at the exit polls in swing states, as they are going to have essentially the most affect on the election consequence.”
Tickmill’s Managing Principal, Joseph Dahrieh, famous that “Traditionally, markets are inclined to rally after elections as uncertainty fades and new insurance policies are anticipated.” Tickmill has even launched a hub for merchants to trace US election-specific market volatility, offering information, knowledgeable evaluation, and historic insights.
A number of different brokers have additionally enhanced their market evaluation instruments for merchants, anticipating a surge in buying and selling exercise across the US elections.
This may annoy all these people who find themselves adamant that TA shouldn’t be related to the $VIX pic.twitter.com/54gb5rDF3c
— Chris Beauchamp (@ChrisB_IG) October 16, 2024
Joseph Dahrieh, the Managing Director at Tickmill
“Volatility associated to massive occasions like elections tends to extend commerce volumes, which advantages brokers by means of fee and spreads,” mentioned Ultima Markets’ Yiu. Commerce Nation’s Morrison agreed to this notion and added that “Brokers favor greater volatility as a result of it usually results in lively markets, offering loads of buying and selling alternatives for his or her purchasers. Some brokers widen their spreads when volatility rises.”
Regardless of these benefits to brokers, GCEX’s Brewer mentioned: “Retail purchasers’ buying and selling efficiency is usually inversely associated to market volatility.”
“Robust market actions are inclined to set off important liquidations of retail purchasers, particularly those that overuse leverage or tackle extreme danger,” he added. “Volatility spikes result in excessive buying and selling volumes but in addition to substantial shopper losses. This makes volatility useful for brokers, whether or not they function a risk-based mannequin (B e book) or a flow-based mannequin (A e book / STP / ECN).”
Methods Brokers Are Utilizing to Put together for Volatility
Nonetheless, volatility additionally poses dangers for brokers who’re unprepared. “Excessive volatility is dangerous for brokers as a result of elevated margin calls, potential slippage, and widened spreads,” Yiu famous. Liquidity is one other problem in risky markets, as he identified: “Liquidity suppliers might pull again or widen spreads, making it more durable to execute trades at fascinating costs.”
“The rise in buying and selling exercise requires robust relationships with liquidity suppliers to handle dangers successfully,” mentioned Dahrieh. “Brokers should additionally guarantee dependable expertise to deal with the surge in transactions and keep away from operational failures.”
Brokers ought to work with a number of liquidity suppliers to forestall disruptions throughout risky durations. “It’s important for brokers to make use of a various mixture of top-tier liquidity suppliers,” mentioned Lea. “This ensures constant pricing, execution, and aggressive spreads, even when one or two suppliers withdraw liquidity.”
Apparently, some brokers scale back leverage or enhance margin necessities throughout occasions of skinny liquidity to handle danger, Yiu identified.
“Brokers strategy high-impact occasions just like the US elections by implementing numerous danger administration methods to deal with market volatility, equivalent to setting publicity limits, monitoring market modifications in actual time, and conducting stress checks to determine weaknesses,” mentioned Dahrieh. “As circumstances evolve, they adapt their practices, develop disaster administration plans to keep up operations, and guarantee ample liquidity. Brokers additionally help merchants by bettering danger administration instruments and offering real-time market insights to assist them navigate the anticipated volatility.”
Market Reactions: How Will the Election Affect Buying and selling?
There is no such thing as a doubt that buying and selling volumes enhance throughout risky markets. However how do merchants behave? How do merchants’ sentiments change in risky markets?
Most retail brokers skilled a growth through the risky interval attributable to the COVID-19 outbreak in 2020. Buying and selling exercise surged, and the income of many publicly listed brokers, together with IG Group and CMC Markets, peaked throughout these months.
Though the US election won’t have the identical affect, it may nonetheless considerably affect the market. Information from eToro additionally revealed that 49 % of retail merchants adjusted their portfolios forward of polls.
“With Trump trying to break the mildew, pleasure might be excessive, and we anticipate a surge in new shopper sign-ups, deposits, and buying and selling quantity,” mentioned ThinkMarkets’ Lea.
Nonetheless, Yiu famous, “Most merchants turn out to be extra cautious earlier than main occasions like elections. They have an inclination to scale back publicity, shut positions early, or hedge their positions to guard themselves in opposition to surprising outcomes.”
He added that “some merchants would possibly act in a different way, seizing alternatives by buying and selling short-term within the greater volatility, both by means of scalping or day buying and selling.”
GCEX’s Brewer additionally identified: “EAs, which account for a big proportion of transactions in our market, are prone to commerce very actively and, in some instances, erratically.”
Conclusion: Navigating Volatility In the course of the 2024 US Election
With the 2024 US election anticipated to deliver important market volatility, brokers are taking numerous steps to arrange. By diversifying liquidity suppliers, upgrading expertise, and bettering danger administration instruments, brokers goal to mitigate the dangers of worth spikes, outages, and liquidity challenges. Whereas volatility can current buying and selling alternatives, each brokers and merchants have to be ready for the potential dangers concerned.
