The European Securities and Markets Authority (
ESMA
ESMA
European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa.
European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa.
Read this Term) published a risk monitoring report on Tuesday, raising concerns of a market correction in 2022 due to the high risks among institutional and retail investors.
Overall, the macro-economic conditions continued to improve throughout the second half of 2021. However, the recovery of the financial markets within the European Union slowed down as the Covid-19 pandemic surged again by the end of last year, impacting the growth and market expectations.
Further, the agency pointed out that there is a scope for reducing the risk levels if the past improvements in the economic environment and the relatively low volatilities in the market prove to be resilient.
Moreover, the agency is concerned over the impact of the mounting geopolitical tensions in eastern Europe that are driving nervousness in the markets. Also, the rise of inflation in the US and Europe impacts the expectations of monetary policy.
Though, ESMA justified its prediction of a possible acute market correction citing that there were already two news-related sell-offs in the market in the second half of 2021. Additionally, the securities markets are overvalued due to elevated price-earnings ratios even though
volatility
Volatility
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
Read this Term was contained.
Risks of an Acute Correction
“All investors should consider that the risk of market corrections remains acute. This was demonstrated last year in two episodes of sell-offs largely driven by news first related to Evergrande and then to the resurgence of Covid-19. The markets remain highly volatile and ESMA sees growing uncertainty for investors going forward,” said Verena Ross, ESMA’s Chair.
“Retail investors are of particular concern to ESMA. Their participation in financial markets has increased substantially in recent years, with new investors taking advantage of the convenience and user-friendly features of mobile trading platforms. This diversification offers opportunities but also comes with risks, and ESMA remains concerned about risks to retail investors who buy assets with expectations of significant price growth, and without realizing the high risks involved.”
The European Securities and Markets Authority (
ESMA
ESMA
European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa.
European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa.
Read this Term) published a risk monitoring report on Tuesday, raising concerns of a market correction in 2022 due to the high risks among institutional and retail investors.
Overall, the macro-economic conditions continued to improve throughout the second half of 2021. However, the recovery of the financial markets within the European Union slowed down as the Covid-19 pandemic surged again by the end of last year, impacting the growth and market expectations.
Further, the agency pointed out that there is a scope for reducing the risk levels if the past improvements in the economic environment and the relatively low volatilities in the market prove to be resilient.
Moreover, the agency is concerned over the impact of the mounting geopolitical tensions in eastern Europe that are driving nervousness in the markets. Also, the rise of inflation in the US and Europe impacts the expectations of monetary policy.
Though, ESMA justified its prediction of a possible acute market correction citing that there were already two news-related sell-offs in the market in the second half of 2021. Additionally, the securities markets are overvalued due to elevated price-earnings ratios even though
volatility
Volatility
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
Read this Term was contained.
Risks of an Acute Correction
“All investors should consider that the risk of market corrections remains acute. This was demonstrated last year in two episodes of sell-offs largely driven by news first related to Evergrande and then to the resurgence of Covid-19. The markets remain highly volatile and ESMA sees growing uncertainty for investors going forward,” said Verena Ross, ESMA’s Chair.
“Retail investors are of particular concern to ESMA. Their participation in financial markets has increased substantially in recent years, with new investors taking advantage of the convenience and user-friendly features of mobile trading platforms. This diversification offers opportunities but also comes with risks, and ESMA remains concerned about risks to retail investors who buy assets with expectations of significant price growth, and without realizing the high risks involved.”
Source: https://www.financemagnates.com/forex/esma-alarms-over-upcoming-market-correction/