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volatile markets

Keeping your business stable in a volatile market

In our ‘new world’ the current market can change in a matter of seconds. And far from being the exception, the global financial markets lead the pack in terms of their minute-by-minute reactions to breaking news. Rapidly closing borders and individual announcements like the recent lockdown in London are triggering violent spikes in volatility as businesses grind to a halt and stockbrokers panic.

As this panic continues to reverberate around the financial world, every asset class has been hit as investors look to move their investments into less risky assets – namely areas they think have greater insulation from the impact of coronavirus. The consequence of this is massive trading volumes, with huge amounts of money being shifted around, all at the same time, creating a mind-boggling number of simultaneous transactions. While a typical busy trading day will see roughly twice the normal trading volumes, we’re currently seeing 5 times the normal volumes.

And it would be naive for firms to believe that the worst is over, with the economic aftershocks likely to be felt throughout the rest of the year. Our CEO, Guy Warren, confirmed that current volatility is not a blip in the global markets in his interview with Waters Technology last week: “The financial damage from this will run well into the late summer as individual companies have issues and governments take action to try and correct their particular economy”.

Future-proofing is the key to resilience 

As a result, fund managers will be forced for the foreseeable future to continue to trade ‘business as usual’. That doesn’t mean to the best of their abilities in light of the present challenges, that means continuing to meet customer demands without missing a beat. If they have a volatility-induced outage while a client is trying to move asset classes, there are significant financial consequences. Those fund managers who aren’t prioritising the resilience of their trading infrastructure and understanding the capacity limits now will find themselves on the long list of collateral fallout from COVID-19.

To begin future-proofing themselves, firms must first understand their present headroom. All systems have a limit of how many trades they can do per minute, yet many firms do not know what this limit is, let alone how to address potential points of failure. Now is the time to end the trial-and-error approach to capacity and get a handle on the exact volume their systems can house today.

“Without the right capacity planning tools it is extremely difficult to identify what the pinch point is for an IT system and when it is going to happen”. ITRS CEO, Guy Warren, speaking to the Financial Times last month.

Capacity planning tools are essential, helping firms to not just calculate their headroom, but identify where potential pinch points exist within their IT systems.

Modelling and stress testing also play a crucial role in the capacity planning of systems. The right software tool allows you to stress test ‘worst case’ scenarios, which then enables firms to put in place plans to deal with this. By using machine learning and modelling scenarios that haven’t happened yet, firms can better predict what the systems can and cannot withstand. Guy Warren explains in an article published in IBS Intelligence: “Firms need to avoid taking a stab in the dark in regard to how much capacity their system can hold. They can use predictive scenario models such as ITRS’ ‘forward-thinking’ solution to model a variety of worst-case scenarios’.

For example, if a firm has just experienced a 4x day, they can model a 6x or 8x day, before then identifying the pinch points in their system and where they can potentially make changes to their estate to counter this.

Regaining control in the face of uncertainty

Uncertainty is the order of the day, whether you’re an individual or a business. This can lead to panic as people feel lost in the maelstrom of constant news – most of it negative. However, firms who feel inundated must remember that it’s never too late to regain control. By utilising the right IT software, firms can gain vital insight into their IT estates and prepare themselves for the next volume surge.