How long will market Volatility last in the FX space? According to panelists from Finance Magnates’ Virtual Leaders Roundtable webinar - volatility will last beyond lockdown measures and should be providing a boost to the FX markets at least until the end of the year.
On Thursday, the 30th of April, 2020, Finance Magnates hosted its first webinar - the Virtual Leaders Roundtable, in which we were joined by four renowned speakers within the industry:
- Andrew Edwards, CEO, Saxo Markets UK
- Jan De Schepper, Chief Sales & Marketing Officer, Swissquote Bank
- Andrew Ralich, Founder and CEO, oneZero
- Natallia Hunik, Chief Revenue Officer, Advanced Markets
During this panel, a number of issues were discussed; however, the focus of the webinar was the impact of COVID-19 on the FX and CFD industry and the businesses that operate within this space. If you would like to watch the video, follow this link.
Volatility is here to stay
After being asked how long recent levels of heightened volatility, which has seen record volumes, trading activity, and account sign-ups for brokers across the world, might persist, the speakers agreed that it wouldn’t disappear as soon as the lockdown measures end.
As highlighted by Andrew Edwards, the CEO of Saxo Markets UK, the longer the lockdown measures continue, the larger the damage there will be to the global economy. Once we are out of lockdown, then there will be a recovery period - government intervention, mergers, and acquisitions, etc., and uncertainty will persist - and where there’s uncertainty, there is volatility.
“I’m not sure we’ll see the same knee jerk reaction volatility we have seen over March and April, but we’re certainly in a new norm, and whilst that uncertainty exists, that volatility will be high… at least until the end of the year. I think if this lockdown goes beyond June, then I think we’re in for a tough time and a volatile time well into next year.”
Andrew Ralich, the CEO of oneZero, added: “I think everyone in this industry came into 2020 praying for a little bit of volatility, we’ve come off two pretty slow years, and we all collectively did the volatility rain dance a little bit too hard and we got a hurricane instead of a thunderstorm.”
Will money managers return to FX?
In the past couple of years, the FX space has seen a sustained period of low volatility, which has progressively driven more and more hedge funds and money managers away from this space. However, now volatility is well and truly back in the markets, will we see a return of money managers?
According to Natallia Hunik, the Chief Revenue Officer at Advanced Markets, this is a real possibility. “Right now, we are witnessing unprecedented moves in the markets, volatility is back, and this is an environment where typically, hedge funds and money managers are typically thriving because they love the volatility…” she explained.
“Due to all the economic effects following the pandemic and all the prices that have spilled over into other industries such as commodities, we do see that more fund managers are looking to implement active FX strategies to take advantage of the currency movements.”
Are new traders coming to FX, or is it inter broker churn?
With heightened volatility has come increased trading activity and a significant increase in the number of new accounts being opened at brokers. But are these new account openings from new entrants into the FX space, that have been interested in the current movements in the space, or is it just existing traders spreading their investments across multiple brokers?
According to Andrew Edwards, the uptick in new accounts is due to a range of factors - people who have not invested before are hearing lots about the trading markets thanks to COVID-19 and are being interested in trading, as well as dormant traders, who haven’t looked at their investment portfolios for some time, coming back to the markets.
“I think its less cannibalizing each other and more new entrants or dormant entrants coming back to markets,” Edwards said.
Jan De Schepper, Chief Sales & Marketing Officer, Swissquote Bank, confirmed this by outlining how the Swiss bank has seen previous single asset traders now venturing into new assets.
“What we have seen when we look back at the crypto wave, we were the first bank to allow crypto trading in 2017, and that created a huge surge in account openings, these young people who started with crypto trading, what we see now, is that many have diverged into FX, to stock trading, and I think we will see similar patterns.”
