Global banks get ready for turmoil
Print Edition
BIG global banks are bracing for potential tumult on financial markets after the US election.
As the outcome of the most bitterly fought US presidential elections starts to roll out in Asia today, the regional markets will be the first to trade on the results.
As a result, Asia-focused banks HSBC and Japan’s Nomura Holdings Ltd are among institutions boosting staff levels, while others are raising the margin requirements for trading to cope with a possible spike in volume or volatility.
Bank preparations ahead of the election reflect their experience following Britain’s shock vote to leave the European Union in June, when the S&P 500 fell 3.6 percent the day after the poll.
In the United States, Morgan Stanley told staff to consider using stop-loss orders, an automated trading mechanism that sells an investor’s position as soon as a stock hits a preset level, if the result causes trading volumes and volatility to spike.
The bank also told advisers in its wealth management unit to prepare for election-related conversations with clients and pointed them to relevant pieces of research.
US brokerage TD Ameritrade is adjusting staff rotas to make as many people as possible available to talk to investors who may be unnerved by any election-related volatility.
“When the markets move, it can be difficult to put emotion at bay and stick to your plan,” said spokeswoman Kim Hillyer.
Traders expect US stock prices to swing by about 2 percent in either direction today, based on the price of S&P 500 index options. Options on the PowerShares QQQ Trust Russell 2000 ETF are pricing similarly large swings before the week is out.
Some banks are projecting a more extreme drop in the event of a victory for Donald Trump.
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