Chris Jenkins journal

Jenkins Journal – Issue 1

Introduction

Welcome to my first blog, which I have decided to call the rather-apt Jenkins Journal
(I know, the hours you must think that it took me to come up with this original title!)

I thought I would give you a quick introduction. I have spent the last 20 years working
in financial and capital markets, where I have focused my time helping traders to
execute more efficiently by bringing the latest trading technology and tools to market
through my role as Managing Director of TORA (an international trading technology
company that was the first OEMS in the market). TORA has offices across the world,
in San Francisco, Hong Kong, Tokyo, New York, Sydney, Romania and Jersey, Channel
Islands.

My main responsibility is to ensure that the company keeps our clients happy, the
operations run smoothly and to ultimately grow the company into new markets
and audiences. I am constantly travelling, visiting my teams around the world. If
you ever want advice on how to beat the jet lag or how to best navigate some of
the world’s biggest airports – look no further! I’ll happily run through the odd travel
recommendation should you wish.

Every month I’ll cover a main story about what’s happening in the market, along with
musings on life on the road and highlights from interesting stories in the press.

 

The big story – With coronavirus, trading desks get a trial by fire for new kit

Meetings no longer start with handshakes. With transmission fears rampant, people
all over Wall Street, and the world beyond, are looking for alternatives. Fist bumps are
now a normal way to open conversations. One went around the room and gave elbow
bumps and others just use the “Wuhan Wave”.

If only all the impacts of the novel coronavirus sweeping the globe were so humorous.

The FTSE is down to its lowest level since 2012 and the VIX spiking over 60 (it remains
at 63 Thursday afternoon as I type this) we are seeing uncertainty at levels not seen
since the final months of 2008.

Whereas that was a crisis that incubated and metastasized inside the financial system,
coronavirus is inherently more diverse. Rather than seeing problems emerge from the
mortgage industry, instead the crisis has unfolded across dozens of industries at once.
Spending, travel, saving and investment patterns shifted in the matter of a week. Saudi
Arabia’s decision to increase oil production (against the wishes of the Russia) has
accelerated uncertainty.

From my vantage point, what makes this crisis different from the Flash Crash or Black
Monday is that a significant portion of the industry is having to respond away from their
office base. Voluntarily and mandatory quarantines have shut offices from Tokyo to
Paris. The entire country of Italy is shut down (though people are at work). Many large
banks, with their elite, globetrotting workforce (and essential support staff), have sent
everyone home.

While financial meme accounts are encouraging sharing/comparing of elaborate work from-
home desk setups, there are some inherent disadvantages to being away from
the institutional nature of the team.

In some ways this coronavirus scare is a chance for the global financial industry to test
infrastructure improvements made over the last decade. Banks, hedge funds and asset
managers have spent billions on new and more powerful systems, with a key goal of
being able to weather large spikes in trading volatility and/or volume.

I think it’s worthwhile to separate firms into two camps – those working from an
exclusively cloud-based infrastructure and those with no or only partial cloud
implementation. Due to its nature, cloud systems are location-agnostic, which means
employees should have the same user experience whether they are in the office or in an
apartment in Fulham. All that is required is a computer and a reasonably fast broadband
connection.

Employees connecting to their company systems via virtual private networks or
applications such as Citrix, are however crucially adding potential latency into functions
that can be latency sensitive. This is job role dependent, so while a few seconds
won’t mean much to someone in the back office, it can be critical for traders dependent
on live market data.

The next few weeks should also show which businesses have been serious about BCP
(Business Continuity Planning). The crisis accelerated so quickly this week that some
American banks were in the process of activating and testing their remote sites at the
same time while markets gyrated and some offices were forced to close. Companies
with detailed plans – and those that conducted ‘fire drills’ in calmer times – should see
an easier transition to what could be the new normal for weeks or months to come.

Added to this confusion is now the very real problem of a Schengen zone/U.S. travel
ban which further restricts the movements of people and seriously impacts many
transatlantic businesses.

I was in Hong Kong in 2003 during the SARS epidemic at the time many firms didn’t
really have a plan for dealing with a crisis of this nature. That’s not the case now. Hong
Kong started to send people home from Chinese New Year and many people haven’t
moved. There are thousands of people working remotely and working efficiently,
showing a way forward even if governments expand restrictions.

Based on the last couple of days, I am cautiously optimistic. While there have been
scattered outages, the global financial system has held up well.

 

So what is going on in the press?

U.S. markets triggered a circuit breaker twice this week, pausing trading for 15 minutes
after the S&P 500 went 7 percent below the previous day’s close. This is the first test of
the current set of breakers, which went into effect in 2013 after a previous version failed
to stop the Flash Clash of 2010. Circuit breakers aren’t universal, but they have been
triggered this week in Brazil and Korea. This week is an important test case for circuit
breakers: when volatility recedes, regulators will need to compare how markets with
circuit breakers stack up against those without.

Millions of people are now working from home, some of whom have never worked
remotely. For people in the financial industry and beyond, there are a host of concerns:
will contractors and support staff be treated the same as full-time employees? Can
existing technology handle the whole company working remotely? How will people
handle the negative parts of remote work, including fewer ways to access information?
The coronavirus has the potential to accelerate a work trend that has been building for
decades.