From the latest BIS report; News on the euro area sovereign debt crisis drove most developments in global financial markets between early September and the beginning of December. Amid ratings downgrades and political uncertainty, market participants demanded higher yields on Italian and Spanish government debt. Meanwhile, difficulties in meeting fiscal targets in a recessionary environment weighed on prices of Greek and Portuguese sovereign bonds.
Conditions stabilised somewhat in October on growing optimism that the end-month EU summit would propose comprehensive measures to tackle the crisis. But by November, investors were growing sceptical about the adequacy of some of these measures. Sovereign bond yields then rose across the euro area, including for higher-rated issuers.
As HFT churn this no liquidity market, we present you thoughts on the Future of Computer Trading in Financial Markets.
Computer based trading has transformed how our financial markets operate. The volume of financial products traded through computer automated trading taking place at high speed and with little human involvement has increased dramatically in the past few years. For example, today, over one third of United Kingdom equity trading volume is generated through high frequency automated computer trading while in the US this figure is closer to three- quarters.
Whilst the prevalence of computer based trading is not disputed, there are diverse views on the risks and benefits which it brings today, and how these could develop in the future. Gaining a better understanding of these issues is critical as they affect the health of the financial services sector and the wider economies this serves. The increasingly rapid changes in financial markets mean that foresight is vital if a resilient regulatory framework is to be put in place. A key aim of this Foresight project, which has been overseen by a group of leading experts, has therefore been to draw upon the very best science and evidence from across the world to take an independent look at these issues.
Full reading here.
Bis Quarterly Review gives some insight into the European Mess;
Global growth and sovereign debt concerns drive markets.
Sharp downward revisions to the strength of recovery in several major economies, particularly in the developed world, drove down the prices of growth-sensitive assets during the review period. Market participants’ concerns about growth were amplified by perceptions that monetary and fiscal policies had only limited scope to stimulate the global economy. The negative news about macroeconomic conditions was compounded by concerns about euro area sovereign debt spreading from Greece, Ireland and Portugal to Italy and Spain. This led to tighter funding conditions for European banks and even affected pricing in euro area core sovereign debt markets. All of these developments led to flows into safe haven assets. Table 1 summarises the major events that affected expectations for global growth and sovereign debt markets during the review period.
Full BIS report here.