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As everything from pubs to operas goes into hibernation to stop the spread of coronavirus, the financial industry, all things considered, has remained remarkably open for business. In Hong Kong, Bloomberg reports that bankers are getting used to doing deals by video chat, while hedge funds are conferring with clients remotely. Shanghai’s stock exchange held a virtual listing ceremony. I’m told that the sector in Hong Kong has been adapting especially quickly in the past three to four weeks.
Most markets for trading things like stocks and derivatives have stayed open for business. The New York Stock Exchange will close its trading floor on Monday, but buying and selling will go on fully electronically. Nasdaq, in addition to running its own stock exchanges, sells technology that’s used for exchanges and market plumbing in more than 50 countries. The company’s head of market technology says the systems have been equipped to operate remotely for at least the past 15 years.
The tricky part is the magnitude, Nasdaq’s Lars Ottersgård said. A company can make sure its employees are able to work from home, but now whole countries are doing it, putting stress on telecommunications infrastructure. Likewise, exchanges and market plumbing have been pushed to the limit of what they can handle by the sheer volume or buying and selling. Ottersgård said it’s something of a “survivor” situation: Nobody is touching their software, for fear or making a change that could be destabilizing.
“There are definitely markets that are very close to what is possible to handle, but they have handled it,” he said.
Algorithms can’t catch Covid-19, but there are signs that Wall Street traders dial back their risk-taking when they’re at home alone, wearing a hoodie and working from a laptop. In a call with big investors, Bank of England officials acknowledged (paywall) this week that this is constraining buying and selling, according to the Wall Street Journal. The newspaper reported that riskier securities like “junk bonds and emerging-market debts, were now near impossible to trade.”
Lockdowns and near-lockdowns in the world’s financial capitals haven’t shuttered financial markets, but a handful of big asset managers want them to close anyway, again according to the WSJ, as coronavirus fears have caused havoc in the prices for everything from platinum to the FTSE 100 Index of London-listed stocks.
Exchange CEOs have pushed back. Euronext chief Stephane Boujnah told Bloomberg that there have been “no operational problems” on its European trading venues. “No one is talking about closing electricity, telephones, the internet or ATMs and credit, so why should we close liquidity and prices,” he said, adding that it’s important that liquidity and price discovery keeps taking place.
The experience of the stock exchange in the Philippines suggests Boujnah and other exchange execs are right. The country’s market shut down recently for two days, only to plunge in a record freefall when it opened again. Analysts told Bloomberg that the closure made investors more wary of the exchange.
So far the Philippines has been the exception. “We remain committed to keeping our markets fully operational,” Charles Li, chief executive of Hong Kong Exchanges and Clearing, wrote on LinkedIn. “Functioning capital markets, with their price discovery and risk management capabilities, play a critical function in ensuring global economic stability.”
This week’s top stories
1️⃣ Financial markets aren’t just volatile because of the coronavirus pandemic. Volatility is a key input (paywall) for some trading algorithms, potentially amplifying the buying and selling during turmoil, according to the Wall Street Journal.
2️⃣ JPMorgan is shutting 1,000 (paywall) of its Chase branches, the Financial Times reports. Drive-throughs will still be open.
3️⃣ Visa is the world’s most valuable (paywall) financial company. “Being the biggest player in a deeply entrenched payments oligopoly turns out to be fabulously lucrative,” The Economist writes.
4️⃣ Banks were at the epicenter of the problem during the financial crisis in 2008. They have a chance to be part of the solution during the coronavirus pandemic, according to CNBC.
5️⃣ Square is a step closer to becoming a bank. Twitter CEO Jack Dorsey’s payment company got conditional approval for an Industrial Loan Company banking charter. The Square subsidiary will focus on small business loans.
Global economic disruptions on Quartz
Governments are readying more than $3 trillion of spending and lending to combat the coronavirus pandemic. Quartz is tracking the money.
Bailouts during the financial crisis in 2008 provide a lesson for how to do it this time: prioritize workers instead of the shareholders.
Companies are being asked to rejig their production lines to respond to the virus pandemic. Advanced robotics, data analytics, and 3D printing have made it easier for companies to switch gears.
Elsewhere on Quartz
Growing families. Fertility care has given more trans people the chance to have biological children, and some care providers are leading the way. They say the science is relatively straightforward, but more needs to be done to guide prospective parents through the complex emotional component. Learn more in our field guide to the business of fertility.
Always be closing
- Boro, a student lender, raised $12 million.
- SME Finance, a lender in the Baltics, got €10 million ($10.7 million) from Citadele Bank.
I hope your week has been a profitable one (pick your own metric). Please send tips, virtual meeting passcodes, and other ideas to jd@qz.com.