Large Wall Street banks have been running “war game” drills in their trading businesses and preparing clients for unexpected scenarios around the U.S. election next week, hoping to avoid liquidity crunches or technical errors as markets react to news of who will be running the White House and Congress, industry sources said.
There is more confidence now than a few weeks ago that there will be a clear presidential winner, because Democrat Joe Biden has moved up in polls against incumbent Republican President Donald Trump. However, the two men are tied in some key States, according to the latest Reuters/Ipsos poll, suggesting it may not be a slam dunk.
Traders, bankers and wary fund managers told Reuters they were preparing for a wide range of outcomes.
One bank’s equities desk has been running drills across major trading hubs in New York, London, Paris and Hong Kong for a variety of scenarios to make sure systems can handle enormous volatility, an executive said .
That bank has been reaching out to top customers to get a sense of how much they expect to trade and ask whether they need margin limits increased, and to suggest they send orders through approved electronic systems rather than calling, to avoid inadvertent mistakes, the person said.
“I don’t think anybody is willing to bet on any particular outcome,” said Peter Kraus, a former executive at Wall Street banks including Goldman Sachs. “The rational thing to do is to take your risk down.”
