While retail brokers across Europe have been struggling to find ways to optimize their business since August, December provided a life-vest for many. A traditionally slow month for trading is very different to past years.
Lethargic trading activity in December is a given. Ask any broker about their least favorite month of the year, and the final one is likely to be on their top list. Markets are traditionally less volatile, as trader attention is typically consumed by the holidays in the last days of the year.
This December, however, is proving to be different. FX volatility has been benign and not much different than recent months. A global stock market rout however coupled with volatility in commodities are driving significant volumes for brokers.
Stock Markets Volatility
The Dow Jones Industrial Average registered its worst December since the days of the Great Depression in the 1930s. The ongoing free trade uncertainty and the growing impasse between US President Donald Trump and Capitol Hill are at the core of the rise in volatility.
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While Trump is blaming the stock market decline on the Fed, political uncertainty is much more central to the current outlook. Some unilateral decisions taken by the US president have exacerbated the distrust of investors into the long-term policy agenda of the White House.
While brokers have struggled to accommodate to the new leverage restrictions in the aftermath of the new regulatory framework in Europe, the migration of clients offshore coupled with the implosion in volatility this month saw some companies get a breath of fresh air.
Several industry executives confirmed that trading volumes ticked higher in the final days of 2018. The extraordinary market moves continued on Wednesday after the Christmas break as traders returned to a thin market.
After falling over 600 points before Christmas, the US market is staging a recovery just as the sentiment across the spectrum shifted to “extreme fear” mode. Markets are typically gyrating towards extremes in times of uncertainty. Some investors have called the current market dip as the best opportunity to go long stocks in a while.
Regardless of whether that proves to be correct, the environment is fruitful for brokers. The final days of this year could prove to be preceding a year of record-high volatility across different asset classes.