Warning: Extreme Volatility Coming

For those who have been wishing for more Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term, your wish is about to come true. This week’s Scottish referendum vote will cause widespread carnage across the global markets. In preparation, prime brokers are tightening credit lines, Prime of Prime’s are increasing margin requirements and brokers are about to be left in a state of slight chaos. This is not a news event like NFP where the markets immediately react. This will be two-day gut wrenching rollercoaster filled with rumors and market movements like we haven’t seen in years. The outcome of the vote is still very uncertain, which makes this an even more volatile event.

Regardless of the outcome, brokers need to prepare themselves. Every broker should expect an increase in margin requirements from their Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term provider. This may or may not happen across the board, but it has already started with several major LP’s. Brokers should make sure they have sufficient funds on place to hedge out any unwanted risk. Additionally, brokers should asses what type of risk they are carrying into the latter part of this week. With extreme market movements expected, risk taking should be reduced. On a final note, brokers need to take a serious look at their own customer’s leverage. Traders will be loading up on “lottery tickets.” Just be sure your brokerage isn’t the one responsible for covering the jackpot.

Best of luck to everyone this week and don’t forget to wear your seatbelt.