In the short term, many City traders are able to take advantage of the heightened volatility we are seeing as a result of uncertainty that has dogged the eurozone over the last two years.
Challenging conditions provide unique opportunities: Amplify itself first took off, thanks to some expert advice from the British Library Business & IP Centre, at the height of the credit crunch in 2009. As I type, positive comments from the eurozone on Tuesday night are still being retracted from Germany. For traders able to receive news early, there are new intra-day opportunities to profit from large intra-day swings, and these are now common.
In a similar vein, the economic foundations on which City traders have made investment decisions, such as the assumption that government debt rated AAA is risk free, has obviously come into question. But when we look at the longer term effects of this crisis for a City trader it is all about regulation: to what degree will this crisis generate a transfer of volume from the City to the Continent? This is a question of vital importance not just to City traders, but to our nation as a whole.
So far Cameron has made it clear that he will try and protect the City’s interests and veto new regulation that may harm London, although overnight we saw the EU’s Herman Van Rompuy declare that the rules may be able to be implemented without a veto opportunity for Britain.
The financial sector in the UK has already suffered significant job losses and should the EU implement legislation to ensure euro transactions take place only with the eurozone, you will see this trend increase exponentially.
A more poignant question regarding regulation, and the time lack of, has also been highlighted by the fall of the eurozone. It has been made clear that John Corzine of MF Global was able to access trader’s margin accounts that should have been properly segregated, to fund his own trading ambitions for the firm. It has been shown that the statements traders were sent did not actually reflect what was in their account as MF Global raided their customer’s accounts to buy European periphery debt, a trade now obviously doomed.
MF Global’s fraudulent activity, highlighted by the eurozone crisis and the resultant devaluation of national government bonds, has raised concern amongst traders across the globe that when it comes to investing there may now be no risk-free option.