Wars and viruses: Are robots less prone to market panic?

Saikat Chatterjee

Widely blamed for volatile “flash crashes” in currencies and equities, high-frequency algorithms may also be why shock global events, including the current coronavirus, seem to have lost their power to spook markets for any length of time. Whether stocks, bonds, currencies or commodities, asset prices seem less prone to any selloff for very long; the U.S. killing of an Iranian general and Iran’s retaliatory missile attack are among potential catastrophes that triggered violent but surprisingly shortlived reactions just since the start of 2020.
In both cases, knee-jerk yen-buying and selling of equities faded within hours, allowing stocks to scale new record peaks.
Now even as China’s coronavirus threatens to throttle economic growth, global stocks are not far off all-time highs.
Certainly, many factors are shaping the resilience, not least central bank money printing and rising global savings which boosted the value of world stocks by $25 trillion in the past decade.
Yet it is hard not to link the shift in reaction by financial markets to the rise of automated trading strategies. In the past six years, the share of algo-trading in the $6.6 trillion-a-day FX market has more than doubled to 27% among fund managers, a survey by Greenwich Associates found.
There is some reason to believe algos cause volatility, especially when trading thins and the humans overseeing them vanish, for instance during public holidays. That’s what likely happened during the Wall Street flash crash of 2010 and dramatic but fleeting yen moves in Jan 2019.
But they also offer the advantage of being able to transact at lightening speed at any hour of the day or night, with razor-sharp accuracy and lower overall costs. Being machines, they are also alien to the common human impulses of fear and greed that tend to take over.
Algorithmic trading is dispassionate, said Scott Wacker, global head of fixed income, currency and commodity e-sales at JPMorgan, one bank at the forefront of the algo revolution.
“As a result, the reaction function in currency markets to even major geopolitical news has considerably shortened which enables stability to return more quickly.”
In short, when left-field events hit, not only can algos scan and react swiftly to newsfeed, many now can gauge the potential asset price impact. The most sophisticated can be “trained” to learn from the experience before the next shock.
One currency trader familiar with algo use said a machine reading coronavirus cases would typically buy stocks if informed of “500 new cases, 10 deaths”. “If it’s ‘3000 new cases, 200 deaths’ they might sell.
“The point being that as soon as a headline is out, the machine-led market is trading on it,” the trader said, speaking on condition of anonymity.
But the machines had ‘vol triggers’, he said, meaning they can stop trading when the market moves beyond specified limits.
HOW IT WORKS
Simple first- and second-generation programmes merely broke down large buy/sell orders into chunks to minimise market impact. Now algos can be hooked up to sophisticated language processing technology, to “read and analyse” news feeds, then react accordingly, all in the space of seconds, said Antony Foster, head of G10 FX trading at Nomura.
However this can “lead to overreaction in the first instance”, Foster warned.
The impact in fast-moving markets can be outsized if the models rapidly push prices towards existing buy/sell order levels, trip them and trigger other orders.
That’s what happened when news broke of Iran’s Jan. 8 attack, according to a quant fund manager, who said algos had bought yen with the aim of triggering larger buy orders once a key option barrier was tripped.
A plausible comparison may be the 0.6% plunge in the S&P 500 within the space of half an hour on Jan. 29. The move came after American Airlines and Lufthansa said they were suspending their China flights, but an hour later, the losses had been recouped.
Stephane Malrait, ING Bank’s head of market structure and innovation, says in such instances algos are programmed to check if moves are in line with price trends.
If the swings are in response to the an incident, human traders can step in to smooth out the trade, Malrait added.
Next, the algos may gauge the seriousness of the incident based on patterns of investor behaviour and economic consequences that followed previous such episodes.
After the Iran missile attacks, the message from the specialised data-crunchers to the algos was: stand down.
One was Geoquant, a U.S. firm which monitors geopolitical events and models the asset price impact.
“We modelled our Iranian geopolitical indicator back to seven years… and put the current tensions against that backdrop,” said Geoquant CEO Mark Rosenberg, who concluded the risk would subside, with minimal oil price impact.
Another firm, Predata, applied its machine-reading algorithm to last September’s attacks on Saudi oil facilities, which had raised fears of a regional war.
To predict what might happen next, the programme compares interested parties’ online attention to a subject, with the media coverage it receives, Predata CEO Hazem Dawani said. The Saudi event elicited little reaction from military officials and policymakers.
“The amount of news was far more than the amount of attention being devoted on the particular subject by investors, politicians, companies directly impacted by them,” Dawani said.
He concluded – rightly – that there would be no escalation.
VIRUS UNKNOWNS
Executives at half a dozen firms providing risk analysis for algo strategies told Reuters their services were increasingly in demand, but declined to give figures.
But they acknowledged limitations.
Reactions to the coronavirus for instance could be hobbled because the only meaningful precedent is the 2003 SARS epidemic which also coincided with the U.S. invasion of Iraq. Second, the pathogen and its dangers are relatively unknown.
Rosenberg said Geoquant’s China Health Risk index was at record highs. That has pushed up the firm’s Social Instability Risk index for China, pressuring Chinese markets.
However, he said this correlation breaks down beyond short periods.
“The longer-term relationship between Chinese Health Risk and equities, Chinese or global, is basically zero,” he said.

xosotin chelseathông tin chuyển nhượngcâu lạc bộ bóng đá arsenalbóng đá atalantabundesligacầu thủ haalandUEFAevertonfutebol ao vivofutemaxmulticanaisonbetbóng đá world cupbóng đá inter milantin juventusbenzemala ligaclb leicester cityMUman citymessi lionelsalahnapolineymarpsgronaldoserie atottenhamvalenciaAS ROMALeverkusenac milanmbappenapolinewcastleaston villaliverpoolfa cupreal madridpremier leagueAjaxbao bong da247EPLbarcelonabournemouthaff cupasean footballbên lề sân cỏbáo bóng đá mớibóng đá cúp thế giớitin bóng đá ViệtUEFAbáo bóng đá việt namHuyền thoại bóng đágiải ngoại hạng anhSeagametap chi bong da the gioitin bong da lutrận đấu hôm nayviệt nam bóng đátin nong bong daBóng đá nữthể thao 7m24h bóng đábóng đá hôm naythe thao ngoai hang anhtin nhanh bóng đáphòng thay đồ bóng đábóng đá phủikèo nhà cái onbetbóng đá lu 2thông tin phòng thay đồthe thao vuaapp đánh lô đềdudoanxosoxổ số giải đặc biệthôm nay xổ sốkèo đẹp hôm nayketquaxosokq xskqxsmnsoi cầu ba miềnsoi cau thong kesxkt hôm naythế giới xổ sốxổ số 24hxo.soxoso3mienxo so ba mienxoso dac bietxosodientoanxổ số dự đoánvé số chiều xổxoso ket quaxosokienthietxoso kq hôm nayxoso ktxổ số megaxổ số mới nhất hôm nayxoso truc tiepxoso ViệtSX3MIENxs dự đoánxs mien bac hom nayxs miên namxsmientrungxsmn thu 7con số may mắn hôm nayKQXS 3 miền Bắc Trung Nam Nhanhdự đoán xổ số 3 miềndò vé sốdu doan xo so hom nayket qua xo xoket qua xo so.vntrúng thưởng xo sokq xoso trực tiếpket qua xskqxs 247số miền nams0x0 mienbacxosobamien hôm naysố đẹp hôm naysố đẹp trực tuyếnnuôi số đẹpxo so hom quaxoso ketquaxstruc tiep hom nayxổ số kiến thiết trực tiếpxổ số kq hôm nayso xo kq trực tuyenkết quả xổ số miền bắc trực tiếpxo so miền namxổ số miền nam trực tiếptrực tiếp xổ số hôm nayket wa xsKQ XOSOxoso onlinexo so truc tiep hom nayxsttso mien bac trong ngàyKQXS3Msố so mien bacdu doan xo so onlinedu doan cau loxổ số kenokqxs vnKQXOSOKQXS hôm naytrực tiếp kết quả xổ số ba miềncap lo dep nhat hom naysoi cầu chuẩn hôm nayso ket qua xo soXem kết quả xổ số nhanh nhấtSX3MIENXSMB chủ nhậtKQXSMNkết quả mở giải trực tuyếnGiờ vàng chốt số OnlineĐánh Đề Con Gìdò số miền namdò vé số hôm nayso mo so debach thủ lô đẹp nhất hôm naycầu đề hôm naykết quả xổ số kiến thiết toàn quốccau dep 88xsmb rong bach kimket qua xs 2023dự đoán xổ số hàng ngàyBạch thủ đề miền BắcSoi Cầu MB thần tàisoi cau vip 247soi cầu tốtsoi cầu miễn phísoi cau mb vipxsmb hom nayxs vietlottxsmn hôm naycầu lô đẹpthống kê lô kép xổ số miền Bắcquay thử xsmnxổ số thần tàiQuay thử XSMTxổ số chiều nayxo so mien nam hom nayweb đánh lô đề trực tuyến uy tínKQXS hôm nayxsmb ngày hôm nayXSMT chủ nhậtxổ số Power 6/55KQXS A trúng roycao thủ chốt sốbảng xổ số đặc biệtsoi cầu 247 vipsoi cầu wap 666Soi cầu miễn phí 888 VIPSoi Cau Chuan MBđộc thủ desố miền bắcthần tài cho sốKết quả xổ số thần tàiXem trực tiếp xổ sốXIN SỐ THẦN TÀI THỔ ĐỊACầu lô số đẹplô đẹp vip 24hsoi cầu miễn phí 888xổ số kiến thiết chiều nayXSMN thứ 7 hàng tuầnKết quả Xổ số Hồ Chí Minhnhà cái xổ số Việt NamXổ Số Đại PhátXổ số mới nhất Hôm Nayso xo mb hom nayxxmb88quay thu mbXo so Minh ChinhXS Minh Ngọc trực tiếp hôm nayXSMN 88XSTDxs than taixổ số UY TIN NHẤTxs vietlott 88SOI CẦU SIÊU CHUẨNSoiCauVietlô đẹp hôm nay vipket qua so xo hom naykqxsmb 30 ngàydự đoán xổ số 3 miềnSoi cầu 3 càng chuẩn xácbạch thủ lônuoi lo chuanbắt lô chuẩn theo ngàykq xo-solô 3 càngnuôi lô đề siêu vipcầu Lô Xiên XSMBđề về bao nhiêuSoi cầu x3xổ số kiến thiết ngày hôm nayquay thử xsmttruc tiep kết quả sxmntrực tiếp miền bắckết quả xổ số chấm vnbảng xs đặc biệt năm 2023soi cau xsmbxổ số hà nội hôm naysxmtxsmt hôm nayxs truc tiep mbketqua xo so onlinekqxs onlinexo số hôm nayXS3MTin xs hôm nayxsmn thu2XSMN hom nayxổ số miền bắc trực tiếp hôm naySO XOxsmbsxmn hôm nay188betlink188 xo sosoi cầu vip 88lô tô việtsoi lô việtXS247xs ba miềnchốt lô đẹp nhất hôm naychốt số xsmbCHƠI LÔ TÔsoi cau mn hom naychốt lô chuẩndu doan sxmtdự đoán xổ số onlinerồng bạch kim chốt 3 càng miễn phí hôm naythống kê lô gan miền bắcdàn đề lôCầu Kèo Đặc Biệtchốt cầu may mắnkết quả xổ số miền bắc hômSoi cầu vàng 777thẻ bài onlinedu doan mn 888soi cầu miền nam vipsoi cầu mt vipdàn de hôm nay7 cao thủ chốt sốsoi cau mien phi 7777 cao thủ chốt số nức tiếng3 càng miền bắcrồng bạch kim 777dàn de bất bạion newsddxsmn188betw88w88789bettf88sin88suvipsunwintf88five8812betsv88vn88Top 10 nhà cái uy tínsky88iwinlucky88nhacaisin88oxbetm88vn88w88789betiwinf8betrio66rio66lucky88oxbetvn88188bet789betMay-88five88one88sin88bk88xbetoxbetMU88188BETSV88RIO66ONBET88188betM88M88SV88Jun-68Jun-88one88iwinv9betw388OXBETw388w388onbetonbetonbetonbet88onbet88onbet88onbet88onbetonbetonbetonbetqh88mu88Nhà cái uy tínpog79vp777vp777vipbetvipbetuk88uk88typhu88typhu88tk88tk88sm66sm66me88me888live8live8livesm66me88win798livesm66me88win79pog79pog79vp777vp777uk88uk88tk88tk88luck8luck8kingbet86kingbet86k188k188hr99hr99123b8xbetvnvipbetsv66zbettaisunwin-vntyphu88vn138vwinvwinvi68ee881xbetrio66zbetvn138i9betvipfi88clubcf68onbet88ee88typhu88onbetonbetkhuyenmai12bet-moblie12betmoblietaimienphi247vi68clupcf68clupvipbeti9betqh88onb123onbefsoi cầunổ hũbắn cáđá gàđá gàgame bàicasinosoi cầuxóc đĩagame bàigiải mã giấc mơbầu cuaslot gamecasinonổ hủdàn đềBắn cácasinodàn đềnổ hũtài xỉuslot gamecasinobắn cáđá gàgame bàithể thaogame bàisoi cầukqsssoi cầucờ tướngbắn cágame bàixóc đĩaAG百家乐AG百家乐AG真人AG真人爱游戏华体会华体会im体育kok体育开云体育开云体育开云体育乐鱼体育乐鱼体育欧宝体育ob体育亚博体育亚博体育亚博体育亚博体育亚博体育亚博体育开云体育开云体育棋牌棋牌沙巴体育买球平台新葡京娱乐开云体育mu88qh88

Leave a Reply