While there’s a lot of discussion about how to stop things like flash crashes, the fact is they are going to keep happening. Regulators are watching closely: ESMA just released a report warning that volatility spikes underline fragilities and risks to securities.
The perfect case study comes from this year’s extreme volatility event in early February, sometimes referred to as “Volmageddon”, which hit the options market like a tonne of bricks: high volatility, evaporated liquidity, bid-ask spreads disappearing off screens, and mismatched margin calculations from clearing firms.
For markets, it’s about managing the ensuing chaos: and how that’s getting done is going big and real-time.
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