Nasdaq’s Tal Cohen on Managing Unprecedented Market Conditions

The markets are seeing some unprecedented volatility in the wake of the COVID-19 outbreak. Tal Cohen, Nasdaq’s Executive Vice President and Head of North American Markets, puts this volatility in perspective and describes how markets are handling this volatility.

Tal Cohen, Nasdaq

What is happening in the markets today, and why? 
The markets are experiencing a level of heightened volatility due to the escalating economic uncertainty and evolving health crisis. The selloff and volatility we’re seeing have signaled a new reality, which we and the larger issuer and investor community are still adjusting to. As more and more companies transition to business continuity plans and remote working environments, we may face new challenges, which will require markets to consider the impact of these changes while upholding investor confidence. From a Nasdaq perspective, we have enacted our business continuity plans and remain confident that we can continue to ensure our markets are resilient and well functioning.

Should markets be shut down to help weather the volatility? 
No. Shutting down the markets, or even shortening the hours of the markets, could make the markets even more fragile and only add to the uncertainty investors and issuers are dealing with. Notice of a market shutdown could also trigger panic and would not serve to support investor confidence. Keeping markets open should be thought of as part of the solution, as it provides investors with access to capital during times of need and allows issuers to raise capital for important aspects of our economy. For instance, what if a Biotech company wants to raise capital for R&D work related to the virus? To date, markets have been processing the information and sentiment from investors and operating as they are designed. It’s important for investors to know that our markets will continue to do so.

Are our market systems holding up under this strain? 
Yes. Our market systems are incredibly resilient, and we’ve processed record-breaking amounts of trades and messages over the last several weeks as the markets react to news around the coronavirus. In fact, we experienced our top 10 days ever in options from an activity standpoint over the past month alone and our highest one-day activity level in equities ever, which was double our previous highs. We expect this to continue over the short term and are well prepared to ensure a high level of resiliency and availability to support investor confidence in the functioning of the markets.

There are a number of policy changes and recommendations coming out. Do you see any impact on the markets so far? 
What we’ve seen throughout history is that government intervention can aid in alleviating economic stress and help set the path to recovery. There are also emotional and psychological factors that impact markets as it considers and digests that information. We saw this going back to the Great Depression and through the Credit Crisis. Steady and proactive government action has been a stabilizing force in the past, and we would expect that to be the case with this crisis.

Is the federal government helping? 
We hope the most recent Fed actions send a strong message to the markets that they won’t hesitate to use all the tools at their disposal to keep liquidity flowing through the system. While these actions should soothe the market psyche, we must recall that this is first and foremost a health crisis, so the ultimate severity and length of this downturn will depend on our nation’s ability to contain the virus and flatten the curve.

What is Nasdaq’s plan if this kind of volatility continues? 
Our markets were designed, built and tested to weather these types of market conditions. We plan to continue to monitor the situation and have been working closely with regulators, along with the broader industry, to ensure we continue to support issuers and investors. We’re also telling our clients and regulators that the markets should remain open to process this volatility and that closing the markets may spike volatility, creating more uncertainty. In closing, we are confident in our ability to manage these unprecedented market conditions and provide a high level of certainty to issuers and investors.