As market volatility continues to shake markets and economies around the world, Bjørn Sibbern, President of European Markets at Nasdaq gives his perspective on how Europe in general and particularly the Nordic and Baltic markets that he oversees are doing in this unprecedented situation.
First, what's the situation like in Europe currently?
Europe has for some time been the epicenter of the COVID-19 outbreak with markets, and in the long-term entire economies, risking extreme negative impact. While southern Europe is harder hit right now, we don't see any real differences in the way markets develop – and we have seen both volatility and trading activity reach peak levels on a regular basis, also on our markets here in Northern Europe. On March 12, for example, Nasdaq Stockholm's benchmark index OMXSPI saw the largest drop in modern times – larger than Black Thursday, larger than the Brexit vote in 2016 and larger than the aftermath of 9/11. So when we talk about unprecedented times, it's no exaggeration.
How is Nasdaq adapting to this situation?
We were early to activate our Business Contingency Plan and to start working in split teams. We did this to ensure that we are able to successfully operate our markets across the world. All non-critical on-site employees were later requested to work from their homes.
As all our European markets are operated through the support of a mix of local staff in the eight countries where we run markets in and some central functions located in Vilnius, Lithuania and our European HQ in Stockholm, working remotely is not new to us. Nevertheless, this is of course a new level and while challenging we have managed to successfully run our markets and all supporting functions without a second of downtime.
There is a discussion on shutting markets in order to mitigate the heavy volatility. Do you think that would be a good idea?
Not at all. The exchange, similar to other financial institutions, plays an important role in the economy. In times of high volatility, it is particularly important to offer investors a chance to get both in and out of positions, and a platform where companies can continue to raise capital.
We have no plans on closing our markets at this point, and we will continue to operate them as normal.
Would you consider a ban on short selling as some countries have done recently?
First – that is ultimately a decision for the Financial Supervisory Authorities in the respective countries where we operate markets. As a marketplace operator, Nasdaq's primary role is to provide the infrastructure where buyers and sellers can meet and to ensure a fair, secure and orderly trading.
That being said, short selling has been an integral part of capital markets for decades and is not only limited to the equity market. It is not only used for directional positioning but also for hedging purposes. Removing the market's ability to hedge will have a negative impact on investors, and it will everything equal increase risk on both volatility and spreads.
There have been reports of market halts in the U.S. temporarily stopping trading to calm the markets down. Do you have similar measures in Europe?
Yes and no. Market-side circuit breakers are not used in Europe the same way it is in the U.S. and elsewhere. That being said, we also have circuit breakers in Europe, but on individual securities. Circuit breakers on individual instruments is the norm across the EU and in the U.K., while the U.S., for example, practice circuit breakers on both individual shares and market-wide.
What's your view on the way forward?
As I've said – Nasdaq operates markets in eight different countries and have offices in an additional five, just in Europe. I think we need to realize that these are unprecedented times for everyone – that includes politicians, business leaders and everyone else. We trust the governments, and all expert agencies and organizations supporting them, to make decisions in the best interest of European societies and everyone in them – both individuals and companies. This is a time for unity and not polarization, and Nasdaq is determined to support where we can.