How Institutions Can Excel in the Economic Storm

Managing volatility correctly is vital for institutions and corporates across the UK

Institutions in the UK have had a turbulent few years. The economy is fraught with uncertainty and instability, which is spilling into markets and causing significant – often unexpected – twists and turns.

Just when we thought we were coming out the worst of COVID-19, war breaks out in Europe. But then, this was most recently been topped off by a national mini-budget that has unintentionally crashed the FTSE and pound, and caused the recent ‘giltmaggedon’ crisis.

The current economic storm presents both opportunities and risks for institutional investors. The rapidly changing market conditions and increasingly large spreads on derivatives and CFD contracts mean that increased liquidity is needed. But for institutional firms, volatility can also equal opportunity if they are armed with the right tools.

That’s why we have launched our new institutional trading solutions, Vantage Connect: to help institutions manage volatility and make the most of the trading environment.

Thunderbolts and lightening, very, very frightening

Volatility is now an everyday fact of life in the markets. At the moment, stock market charts resemble lightning strikes, flashing up and down unpredictably, with even precious metals seeing big spreads. While volatility is always welcome, the markets have become increasingly complex and hard to predict – increasing concern amongst institutional traders.

Inflation rates across the world are also skyrocketing. According to data from CitiGroup, inflation in the UK is expected to hit 18% in the new year – a serious problem, creating more market fear, and in turn more volatility. This raises serious questions over interest rates, which seem to be following suit, and with the UK not ruling out emergency interest hikes, institutions are keen to access any help that they can get their hands on.

The UK’s recent mini-budget is an example of the subversion of normality. Budgets and similar Government intervention are usually meant to give confidence, but this one only succeeded in increasing market volatility. It caused the pound to crash and the Bank of England to step in with emergency measures to ensure that pension funds didn’t run out of collateral.

However, although the financial outlook seems fairly dismal and a storm has clouded the vision of traders, there is light at the end of the tunnel. For institutions, getting a partner that can offer them a bespoke trading option, helping them to complete a high volume of complex trades, across multiple asset classes will help them to ensure that they find the opportunity that this period of volatility brings with it.

The right equipment for stormy weather

Managing volatility correctly is therefore vital for institutions and corporates across the UK, especially for the biggest investment banks and asset managers, who are trading high volumes of money in multiple complex trades.

In this period of volatility, each minute – each second – in trading has become more important for traders across the world. Global trading volumes have increased 17.2% YoY in September 2022 to compared to September 2021, spurred by institutions trying to navigate the markets.

The pace has suddenly quickened and institutional trading teams need the best tools to possible, with fast execution, deep liquidity, and that can be tailored to suit their trading needs.

It’s very possible that we’re only just scratching the surface of a long period of unpredictability in the economy and markets, so institutional traders need to make sure that they can seize all market opportunities. Speed is key, and Vantage Connect make sure that they are getting ahead of the competition and executing the trades when they need to be executing them, acting as shelter from the storm.

Author: David Shayer, CEO, Vantage UK