Opinion

Before Friday, March 26th, few had heard of Archegos Capital Management, an investment vehicle owned by Bill Hwang, a former hedge-fund trader with a volatile risk-taking past. Archegos had emerged as the entity behind the huge sale of at least $20bn worth of shares, which shocked the stock markets on an otherwise unremarkable Friday and has left at least two global banks – Credit Suisse and Nomura – facing multi-billion-dollar losses.

If anything has demonstrated the cracks… or rather gaping holes.. in the risk management procedures of the Tier 1 FX interbank dealers recently, it has been the debacle surrounding the now notorious Archegos hedge fund.

The phenomenon of day-traders piling into no-fee, mobile-native venues in unprecedented volumes to buy stocks and call options in GameStop and other heavily short-sold companies reverberated throughout financial markets in the last week of January. The snowballing demand created massive share price volatility and huge collateral requirements, restricting retail investors’ access to trades as momentum was reaching its peak

Salvatore Buccellato is an FX industry veteran who recently took on Chief Executive Officer’s role at Delkos Research. The company provides various customer behaviour analytics tools to help brokers maximize customer retention, revenue and increase client lifetime value. We spoke with Salvatore about the company’s recently launched RAZR product, which enables firms to adopt an effective client engagement strategy.

Yesterday we saw further volatile trading in GameStop shares. Whether this is the start of another rally or just day traders ‘shaking the tree’, time will tell. But what is clear is that this new trading type won’t just go away. 

Now that Finantsinspektsioon has decided to fine Admiral Markets AS, the trading industry can only expect a cascade of fines against other brokers who made similar decisions to preserve stable trading conditions amid unprecedented events like the negative oil prices and the r/WallStreetBets mania.