UK stock wipeout – Time to go multi asset on MetaTrader

I am no market analyst, however having worked in this industry for almost 30 years as a technologist, commentator and observer, I would be hard pressed to name a period in which British stocks had £50 billion wiped off them overnight. Even during the 1991 recession in which interest rates were 15% and construction companies […]

Lord Myners blasts LSE and Deutsche Boerse merger

I am no market analyst, however having worked in this industry for almost 30 years as a technologist, commentator and observer, I would be hard pressed to name a period in which British stocks had £50 billion wiped off them overnight.

Even during the 1991 recession in which interest rates were 15% and construction companies upped sticks and left half-built housing estates for the banks to repossess, this did not happen.

Even during the 2008 credit crunch in which small businesses could not access credit lines to keep their supply chains flowing, and large companies could not use the flow of capital usually readily available to them whilst Fred the Shred walked off with his full pension, his actions leaving the biggest bank in the UK in absolute ruins.

Here in Canary Wharf, the line of chauffeur driven cars no longer extended across Bank Street E14 waiting for Lehman Brothers executives to sit in their luxurious rear seat whilst whisked silently away to investment banking conference, global leadership meetings or to dine with multi-billion dollar blue chip clients, for Lehman Brothers was suddenly no more.

Even then, still no massive stock market wipeout.

This week, an astonishing £50 billion of value has vanished from British stocks as the incompetent government considers capitulating to unelected brutes who would like to see the financial capital of the world enter another national lockdown.

This represents a considerable percentage of last year’s entire GDP for the United Kingdom, that being $2.7 trillion… and it happened in just one day.

London’s FTSE 100 share index closed down 3.4%, with airlines, travel firms, hotel groups and pubs leading the rout. Worst hit was British Airways owner IAG, down 12%.

In other regions, markets in Paris, Frankfurt and Madrid also dived, while the US Dow Jones index lost 1.8% after paring losses but Britain’s massive hit shows that the nation with the strongest currency in the world and which is home to London, the world’s financial capital, is a key time for retail traders to go multi asset and begin trading volatile stocks.

Many retail FX brokerages have steered away from anything other than Spot FX since the birth of MetaTrader in 2004, largely because MetaQuotes originally designed this platform for Spot FX only, and for it to be a closed system with no price feeds, meaning that in its original format, it did not connect to live markets and was a pure dealing desk solution.

Additionally, many of its early adopters were not originally from our industry, but were affiliate marketers, thus they saw it as an onboarding vehicle for media buying campaign conversions rather than a bona fide trading platform.

Today, things are somewhat different and the system is now dominant in the global retail FX world, largely due to specialist software development companies that have enabled MetaTrader’s connection to live price feeds and to give retail brokers which do not wish to invest in their own infrastructure the chance to offer their clients genuine Tier 1 liquidity from a range of prime of prime brokerages and non-bank market makers.

With stocks and equities so volatile and for the first time in history sentiment changing so rapidly according to whether tyranny will be imposed on a previously free democracy, the first ever wave of extremely volatile stocks is now with us.

Retail traders had long seen stock, futures and equities trading as out of reach, with very high exchange membership fees, clearing fees and slow transactions due to a centralized counterparty in the form of an executing venue having to add an extra layer to closing trades compared to the lightning fast OTC markets with their tiny costs and retail client focused approach.

Not anymore!

Nowadays, MetaTrader is fully connected to the multi-asset marketplace. FinanceFeeds will be reporting about the latest developments in that area later this week, as a fully integrated solution including access to futures venues, equities market places and global stocks is now fully available for MetaTrader, meaning brokers can offer their clients access to futures exchanges, stock markets and equities brokerages without the expense of membership fees and without having to divert their existing client bases away from MetaTrader, the most familiar platform in the market.

Aside from the volatility, which is likely to be around for the foreseeable future due to the pre-planned lockdown-after-lockdown state that most of the world will now be subjected to, there is also the opportunity to get away from the behavior of Tier 1 banks, which have for some time not been playing a fair game.

Whether it is last look execution, which the Tier 1 FX dealers all participate in yet if FX brokers did that there would be severe regulatory censuring, or whether it is the fixing of rates, or other malpractices such as penalizing OTC brokers on their counterparty credit agreements yet expecting 100% of all FX order flow to be processed via banks on last-look single dealer platforms.

They’ve had it their way for a long time, and now the cracks are showing – XTX Markets and Citadel Securities, both non-bank market makers, have begun to take the top slots for FX Tier 1 dealing market share globally.

Currenex and Hotspot, 360t and other ECN orientated FX entities are rising to the top too.

This share collapse this week is no exception, and some of the firms affected are banks. Not only due to the fears of banks being lumbered with endless bad loans due to businesses going bankrupt during lockdowns and retail customers taking ‘payment holidays’ as they are stuck at home and not allowed basic human rights such as going out and earning a living to provide for their familes. In this respect, banking shares were affected by an extra set of concerns as allegations of money-laundering surfaced in leaked secret files.

So, at a time during which confidence in banking strength may be already low, instesad of knuckling down, what do they do? Misbehave.

HSBC, the bank at the centre of the scandal, saw its share price fall 5.3% in London, but the revelations dragged down the entire sector, with other big banks dropping by a similar amount.

On Wall Street, JP Morgan Chase and Bank of New York Mellon saw their share prices fall 3% and 4% respectively in response to the reports.

The downward trend affected all but a handful of stocks on the UK’s 100-share index. Only online delivery service Just Eat and supermarkets Tesco, Morrisons and Sainsbury’s made it into positive territory.

The FTSE 250 index, seen as a better reflection of the health of the UK economy, closed nearly 4% lower.

One of its biggest fallers was pub and restaurant owner Mitchells & Butlers, which dropped more than 15% as concerns grow that the hospitality industry would have most to lose from a fresh lockdown.

The pound also lost ground against the dollar, falling 1% to $1.2790. It fell 0.4% against the euro to €1.0897.

There has certainly been an element of European unity on the markets today, with the FTSE 100 index in London, the Cac 40 in Paris, the Dax in Frankfurt and the Ibex in Madrid all suffering similar falls.

The reason behind the gloom seems pretty clear. With the number of Covid-19 cases multiplying rapidly here and in many European countries, there’s a real prospect of new restrictions on daily life. In some regions – such as Madrid, for example – they’re already in place.

The fear is that although these measures are unlikely to be as severe as the lockdowns in spring, they will nonetheless weigh on economic activity and could stifle the post-lockdown recovery.

Shares are down across the board, but inevitably, the companies which rely on people being able to get out and about and mingle are among the worst affected.

This dark picture does allow us all to draw a conclusion, this being that the more analytical and astute among us will use the lockdown time to trade from home on a more regular basis, largely with company stock and equities.

Brokers, now’s your chance!

 

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