September means back to school — and back to volatility. For traders and portfolio managers, coming back to the desk from summer break might not be the gentle return they hoped for.
This year, seasonal September volatility collides with heightened uncertainty, geopolitical tensions, critical economic data releases, and the aftershocks of tariff announcements earlier this year. Here in Europe, we are facing our own problems – a potential collapse of the French government, soaring UK borrowing costs and a highly consequential UK’s Autumn Budget.
For trading desks, volatility means opportunity. Catching the right waves can generate impressive trading revenue. However, firms need to ensure that all hands are to the pump and traders have a clear real-time picture of market conditions. Productivity and processes therefore need to be maximised across operations, without them firms risk missing out on opportunity – or worse.
Capitalizing on volatility
As we head into uncharted waters, trading desks need to quickly find the best path through volatility by simultaneously chasing alpha and mitigating risk. Traders and portfolio managers therefore need to be able to understand exposures across asset classes across geographies, as geopolitical events and economic announcements move global markets.
Volatility by its nature requires fast action and precision. In a heartbeat, traders and portfolio managers need to digest news and data, asses their exposures, rapidly access liquidity and execute as efficiently as possible. To achieve this, front-office teams need four key features from their trading platforms:
- Visibility: Whether volatility is triggered by AI-driven stock surges, a run on government bonds or unexpected economic data, firms need instant views of their exposures across asset classes. Understanding exposures and opportunities in volatile markets is essential to guiding investment strategies in times of market stress.
- Liquidity: Proprietary networks, instantly connecting front-office teams with counterparties across regions are a major strategic advantage. Normalized trading across asset classes gives traders the nimbleness to duck and weave risk, while land their punches when attacking volatility.
- Data: Without quality market and portfolio data, investment teams are flying blind. Having real-time data in one place allows traders to act decisively and in-step with middle and back-office teams. Instant access to the best algo pricing and liquidity data means that firms can act rapidly and with confidence.
- Risk management: Close connectivity between the front office and risk management teams is vital to ensure that rapid action is met with the appropriate risk mitigation. Seamless connectivity between investment and risk teams is essential when stakes are highest.
Disparate legacy technology cannot efficiently offer these features through a single interface. When markets are on fire, traders cannot afford to waste time grappling with siloed systems or dig through messy data sets. Having a consolidated best-in-breed multi-asset EMS is essential.
Make hay
September is often a rollercoaster, and this year looks set to be no different. A Reddit post or the stroke of the US president’s pen can send markets soaring or tumbling. In these conditions, advanced trading tools, in-depth data and deep liquidity are essential to success.
To thrive, firms need these capabilities in best-of-breed trading systems that centralize and normalize trading operations and data across asset classes and geographies. When volatility hits, there is no time to scramble for data or liquidity. By automating key processes and offering traders the tools such as configurable auto-routing and algo wheels alongside the information they need in one place, bouts of volatility can be an exciting opportunity rather than cause for panic.
As extreme market events become more frequent, rare moments of calm are opportunities to take stock. By addressing operational gaps and tackling efficiencies means that firms can be on the front foot and ready to reap the rewards when markets return to volatility.
Read – Continuous markets or converging markets? How buy-side desks must be ready for anything
