On Wall Street, it’s considered a rite of passage to spend election night at your desk, teeing up orders and making trades until the wee hours. This year could be even wilder than normal, though many participants will be experiencing it from home.
With a tight race and President Donald Trump questioning any outcome that doesn’t have him defeating Democrat Joe Biden, trading volumes are likely to spike to as much as eight times their normal levels Nov. 3, according to technology-consulting firm ITRS. That forecast and a spread-out workforce has the biggest banks testing their technology to make sure they can handle the extra flow.
Financial firms are telling staff members and clients that this year will be different. With coronavirus-fearful voters relying on mail-in ballots, and the U.S. Postal Service already beleaguered by delivery problems, election results could be delayed by days or longer.
Trump said this week he would not commit to a peaceful transfer of power if a tally of ballots shows Biden winning. Senate Majority Leader Mitch McConnell pledged an orderly transition.
Another factor that is likely to make this November different from past presidential elections: As the Covid-19 pandemic surges in parts of New York and in financial hubs such as London, many traders probably will be at ad hoc workstations in their living room.
“We’re talking to clients about the potential that it might take longer than expected,” said Itay Tuchman, global head of foreign exchange trading at Citigroup. “And the period of volatility might be longer than expected just because of the dynamic of mail-in votes versus in-person votes in such a close election.”
Exchanges have said they’ve been seeing trades protecting portfolios against election-induced volatility for much of this year. Banks’ increased attention on operational resilience comes as regulators including the Federal Reserve and the U.K.’s Financial Conduct Authority have said they’re focused on ensuring financial firms are able to adapt and rapidly recover from any disruptions.
ITRS has been helping banks model for volatile trading days and determine where they might see issues. “Most people can’t work out what will choke until it’s crashed,” said Guy Warren, the firm’s chief executive.
Most banks aren’t planning to have even half their staffs back in the office by Election Day. Some, including Goldman Sachs and JPMorgan Chase, have paused plans to return workers to their offices in London following appeals by the U.K. government seeking employers’ help in damping a Covid-19 resurgence.
At Citigroup, the firm’s systems proved they could handle extra order flow in March, said Deirdre Dunn, global co-head of rates trading. That was the month market volatility skyrocketed and the bank sent workers home in droves to help stem the virus’s spread. The systems’ resiliency then shows Citigroup will be prepared come Election Day, Dunn said.
“If I look at 2016 as a comparison, it meant a lot of people were staying in the office all night,” she said. “At least at this point we can probably do some of that from our houses as opposed to being in the building at 3 in the morning.”
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September 26, 2020 at 12:37AM
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Wall Street prepares systems for election night trading surge - Crain's New York Business
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