Head of Trading, Nilan Morar, breaks it down for us:
Current volatility has reached levels last seen during the 2008 financial crisis!
Many new market participants (ok, maybe not so new, but at least those who have entered the market in the last 10 years or so) have never seen the world’s largest markets with the deepest levels of liquidity moving by 10% or more in a single trading session.
To deal with periods of extremely high volatility, post 2008, exchanges around the world introduced a mechanism commonly referred to as circuit breakers, that kick-in to halt trading if a particular stock or index moves by a certain predetermined percentage. Locally we’ve adopted the same methodology and have the concept of “Limit Up” or “Limit Down” applicable to indices, and intraday circuit breakers too, that trigger volatility auctions for individual stocks.
Ignoring the technicalities, an auction can last for 5 minutes or longer, depending on which segment of the market the stock is in, what type of auction it is or if it enters an extended auction period.
All these measures are in place to protect you as market participants and to ensure a fair market price. As you are aware EasyEquities displays 15-minute delayed prices, and this is particularly important to remember as the prices you see on the platform could very well be as the result of an auction that was in progress 15 minutes prior. In other words, these prices could be inverted or could vary, sometimes significantly from where the stock was trading prior to the auction.
The most recent examples of some of these variances are Naspers, Capitec and Sasol.
Given the various time zone differences between different markets, we often find our market responding one way or the other to large moves that occurred during the US session the evening before or the Asian session prior to us opening, causing many of our stocks to extend their opening auctions or open and very soon thereafter enter volatility auctions.
To try and protect you further from experiencing the effects of volatility that we are seeing recently at the open, we have decided to change the platform opening time to 09.10am SA Time from 09.05am SA Time. This will be effective Monday 30 March 2020 and we will continue to monitor actively and may revise these times at a later stage.
I worked hard with my marketing teammates to make this mailer be as understandable as possible to our over 300 000 Easy community members – all with differing levels of expertise in investing. If you didn’t understand this – our brand managers didn't at first 😉.
Bottom line: our platform will now open five minutes later at 9.10am, Monday to Friday, to protect Easy users against extreme market volatility.
Should you wish to understand more about auctions in the markets and how volatility affects market opens, read this article on share prices in the markets. This is the perfect time to check out our brand new Help Center, which will go a long way in helping you understand the platform, markets, and investment practices.
Thank you for choosing EasyEquities, the home of online investing made easy.
Stay HOME, stay SAFE, and stay EASY.
Nilan Morar (Head of Trading)
and the EasyEquities Team.