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Financial Industry Participants Anticipate Rise in Volatility and Say Investors are Too Complacent

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SOURCE ConvergEx Group

ConvergEx Group Survey: Federal Reserve More Likely Than Middle East or Ukraine to Cause Volatility

Two-Thirds of Sell-side Respondents Say Low Volatility has Been Bad for Their Business

NEW YORK, July 30, 2014 /PRNewswire/ -- ConvergEx Group, a leading provider of global brokerage and trading-related services, has released the results of its U.S. Market Volatility Survey, exploring financial industry sentiment about market volatility, the CBOE® Volatility Index (VIX®) and macro drivers of investor activity.

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While almost three-quarters (71%) of survey respondents expect volatility to climb from historically low levels by the end of September 2014, and even more (81%) expect a rise by the end of December 2014, two-thirds (66%) say that market participants are too complacent, or much too complacent. A majority (51%) of those surveyed identified U.S. Federal Reserve policy as the most likely driver of a near-term spike in volatility, far more than the number who named events in the Middle East (16%) or Ukraine (14%). 

"The VIX is often called the 'fear index', and while investors don't seem to be worried right now, our survey respondents say a little fear may be in order," said Tony Saliba, ConvergEx Group executive managing director. "We also have a clear picture of how record-low volatility has hurt the sell-side: two-thirds of banks and brokers say the current environment has been bad or very bad for business."

More than half (59%) of those surveyed call the VIX an accurate or very accurate predictor of short term market volatility, while just 8% believe the index to be "not accurate" or "not at all accurate". Respondents predict the VIX will be at 13.3 by the end of September 2014, and at 14.5 by the end of December 2014.

For more information on the ConvergEx Group U.S. Market Volatility Survey, click here.

Markets Too Complacent 
Respondents feel strongly that investors are too complacent, given historically low levels of volatility. Key findings:

  • Too Complacent/Much Too Complacent – Total 66%
    • Much Too Complacent – 16%
    • Too Complacent – 50%
  • Not Complacent/Not At All Complacent – Total 11%
    • Not Complacent – 9%
    • Not At All Complacent – 2%

America at the Epicenter
Survey participants overwhelmingly identify U.S. Federal Reserve Policy as the most-likely macro driver of a spike in volatility. Key findings:

  • U.S. Central Bank Policy – 51%
  • Events in the Middle East – 16%
  • Events in Ukraine – 14%
  • Foreign Central Bank Policy – 4%

U.S. financial markets were identified as the most complacent, with 75% of respondents singling out U.S. equities or fixed income. Key findings:

  • U.S. Equity – 50%
  • U.S. Fixed Income – 25%
  • International Equity – 9%
  • Currencies – 7%
  • International Fixed Income – 6%
  • Commodities – 3%

Sell-Side Struggles
More than one-third (38%) of all respondents say that low volatility has been bad or very bad for business, but that number jumps to (63%) for the sell-side alone. Key findings:

Bad/Very Bad for Business (All Respondents) – 38%
Good/Very Good for Business (All Respondents) – 27%

Bad/Very Bad for Business (Sell-side only) – 63%
Good/Very Good for Business (Sell-side only) – 12%

Bad/Very Bad for Business (Buy-side only) – 21%
Good/Very Good for Business (Buy-side only) – 42%

Methodology
The ConvergEx Group U.S. Market Volatility Survey was performed by ConvergEx via an online survey of financial industry participants, resulting in 236 respondents. The survey was conducted from July 24 to July 28, 2014, and has a margin of error of +/- 10%. Respondents included buy-side firms (asset managers, hedge funds), sell-side firms (banks, broker-dealers), trading venues, service providers and other financial industry participants.

About ConvergEx Group
ConvergEx Group is a provider of global brokerage and trading-related services. Its companies provide services in the following areas: global execution, commission management, independent research, commission recapture, options technologies and prime services. ConvergEx Group companies do not engage in market making or investment banking, but may operate in a riskless principal and/or net trading capacity as well as in an agency capacity.  In connection with certain ETF transactions requested by clients, ConvergEx Execution Solutions may act as a principal or engage in hedging strategies in connection with such transactions.

ConvergEx Group in the United States comprises ConvergEx Execution Solutions LLC (member NYSE/FINRA/SIPC); LiquidPoint, LLC (member CBOE/SIPC); G-Trade Services LLC (member FINRA/SIPC); Westminster Research Associates LLC (member FINRA/SIPC); ConvergEx Prime Services LLC (member FINRA/SIPC); and ConvergEx Solutions LLC, of which ConnEx, Jaywalk and LDB are divisions. ConvergEx Group, LLC is a subsidiary of ConvergEx Holdings, LLC.

In London, ConvergEx Group operates through its subsidiary ConvergEx Limited, which is incorporated in England and Wales (registered with company number 06262150). ConvergEx Limited is authorised and regulated by the Financial Conduct Authority ("FCA") of the United Kingdom and its FCA firm registration number is 472780.

Any trademarks or service marks used by a ConvergEx Group, LLC company are owned by the company using the mark unless indicated otherwise.

The material, data and information (collectively "ConvergEx Information") that is available from ConvergEx Group businesses is intended for institutional investor use only; is for informational purposes only; is subject to change at any time; is not intended to provide tax, legal or investment advice; and does not constitute a solicitation or offer to purchase or sell securities. The ConvergEx Information is believed to be reliable, but none of the ConvergEx Group businesses warrant its completeness or accuracy. Please read your agreement with us carefully, as it contains important information and disclosures about the product or service covered by it. (Rev. 5/1/14) 

Please be advised that options carry a high level of risk and are not suitable for all investors. To receive a copy of the Options Disclosure Document, please contact the ConvergEx Compliance Department at (800) 367-8998.

© 2014 ConvergEx Group, LLC.  All rights reserved.   7/1/14

Contact: Michael Kingsley  
              MKingsley@convergex.com 
              212.468.7713

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