(Reuters) – London Stock Exchange Group PLC Chief Executive David Schwimmer said on Thursday that large spikes in volume associated with algorithmic trading have exacerbated recent market volatility, exposing weaknesses in the global market infrastructure.
“What that means is when there’s an event … some kind of crisis like the onset of COVID in the spring of 2020, you see massive moves in the markets very quickly, and a lot of the plumbing out there can not handle that,” he said in an interview at the Reuters NEXT conference.
At the onset of the COVID pandemic in March 2020, some banks reached out to LSEG, asking it to close its markets for a day or two so they could catch up with post-trade processing, he said.
“We didn’t do that, obviously, because it’s important for us to keep the markets open and maintain that functionality, but I mentioned that because it’s where there may be some progress made over time,” he said.
Another “weak spot” in global markets is in the private equity and debt markets, which have grown quickly in recent years, while using lots of leverage, but with very little transparency, he said.
“A lot of people are sort of wondering and watching, how does that play out as rates continue to go up,” he said.
(Reporting by Peter Thal Larsen and John McCrank in New York and Noor Zainab Hussain in Bengaluru; Editing by Matthew Lewis)
