On a mild day in December, U.S. Federal Reserve Chairwoman Janet Yellen announced that the Fed would raise interest rates in 2016 for the first time in a decade. After the initial announcement, she held a press conference where she stated that the economy had improved to the point where inflation was a concern and raising interest rates would help keep it in check. As one CNN commentator breathlessly said as she tried to process the news, The U.S. economy is no longer on life support-the patient has left the hospital.
With this seemingly good piece of news, traders could be excused for asking, Why do things feel so lousy on the trading floor? Last year was, if anything, far from boring. The previous 12 months saw record fines for dark pool rule-breaking, exciting spikes in trading volume and confusing, panic-inducing sell-offs that felt more like a crash than a correction. At this years Security Traders Association Market Structure Conference in Washington, D.C., the feelings of doom at the 2013 event were replaced by dismay over the August 24 correction, the specter of looming regulations and uncertain liquidity levels in the bond market.
Will 2016 be a follow-on to 2015? The editors of Traders asked this question when we looked at the leading topics and trends that occupied the minds of our audience. It was a year of shrinking bonuses, the rise of IEX as yet another exchange in an already crowded trading venue space, and jarring IT outages that plagued trading stalwarts Bloomberg and the New York Stock Exchange. It wasnt all bad news, to be sure, but it was a world of change. High-touch and low-touch trading are evolving into one-touch operations; algorithms became even more customized for choosy traders; and Bitcoin gained a measure of respect that only comes to established instruments of investment: Smart firms are building an infrastructure for trading the once-shady digital currency.
In the next few pages, we examine the news stories and trends that had the biggest impact on workdays of traders and brokers in 2015 and will still be open for debate in 2016. Whether it was the threat of new rules, liquidity vs. volatility or eyebrow-raising penalties, we bring you the issues that will keep traders eyes on their array of monitors.
And once again, Michael Lewis, that chronicler of the Wall Street and American zeitgeist, is in the news. Last year, Flash Boys was the high-frequency trading book of the year for traders. This winter, the film version of Lewis housing-market bubble saga The Big Short is in movie theaters. Traders and the rest of the country are still navigating the waves of the 2008 liquidity crisis that almost sank the worlds economy. Heres hoping that 2016 brings smoother waters.
