The European Central Bank has put its Stoxx 50 trading system on lock-in as part of its efforts to manage the market during a period of heightened uncertainty. A lock-in occurs when a trading system’s price action no longer changes when the market becomes volatile.
The Stoxx trading system was designed by a team at GaveKal Consulting. Their expertise in this area was recognized when they won the European Commission’s first ever European award for its role in creating the Stoxx trading system. Its creators, Ben and Peter Oester, are both former financial regulators with close knowledge of the markets and regulatory measures to mitigate risks in the financial markets. With more than two decades’ experience in financial markets, Oester and his team were able to determine the right trading strategy based on the specific risks that they were dealing with.
As part of its role as a central bank, the ECB also introduced several policy tools in an effort to manage market volatility. The goal is to provide economic and financial institutions with a flexible framework to implement effective policies while minimizing the risk of negative effects on the financial system and economy as a whole.
Despite its popularity, the Stoxx trading system has come under intense scrutiny from some quarters and was subject to criticism for not providing the liquidity that it was meant to. This criticism resulted in the ECB imposing a series of policy limits on the amount of money a company can invest on its platform.
In addition to the limits placed on the amount of money that a company can invest, it has also introduced limits on the number of positions a company can open and maintain on its platform at any one time. It has been argued that these limits have limited the ability of individual traders and institutions to access and exploit the potential of the Stoxx trading system.
At present, the ECB is working on ways to remove the policy restrictions that are placed on the Stoxx trading platform in order to allow for better access to the markets and to create more liquidity in the markets. Although it is unlikely that the ECB will completely remove the system from lock-in, it is expected that it will reduce the size of the lock-in period or introduce a smaller lock-in period. to mitigate the risk associated with the use of this trading platform.
For traders and institutions that have invested in the Stoxx trading system, the reduction of liquidity has led to significant losses and also a change in their trading strategies. This has been particularly problematic for those investors who had invested in the Stoxx 50 on margin. It is not only a loss of profits due to the inability to execute trades immediately, but also significant loss of capital that may take place if a trader’s funds cannot be withdrawn from the trading account once the lock-in period has expired.
Traders that had a large amount of leverage on the Stoxx platform also experienced significant loss because they were unable to execute orders quickly enough to avoid losses on their positions. The ECB is still considering its options, but may soon lift the lock-in period and lower the exit price of the Stoxx platform so that traders can continue to make profits until further notice.