As the CBOE Volatility Index rose sharply Monday — nearly 43%, ending the day at 82.60 and surpassing its 2008 peak of 80.86 — regulators stressed that the equity markets should not be shuttered.
Securities and Exchange Commission Chairman Jay Clayton said Monday that the stock markets need to remain open despite fears tied to the coronavirus and the associated economic fallout.
“Markets should continue to function through times like this,” Clayton said in an interview with CNBC before the markets opened. Clayton added that the SEC has been in touch with other financial institutions.
He spoke a day after the Federal Reserve cut its benchmark interest rate by a full percentage point to almost zero and pledged a return to quantitative easing via the purchase of at least $700 billion in Treasury and mortgage bonds.
Nasdaq CEO Adena Friedman agreed with Clayton’s views. “It is critically important that the markets stay open at this time, as opposed to trying to take breaks in the middle,” said Friedman in an interview with Bloomberg Television. “I think that’ll just push off the situation a little bit, but actually could create other pent-up issues.”
But some market watchers disagreed. Following the Fed news and the weakening of U.S. equity futures, Jim Bianco, President and CEO of Bianco Research, said in a blog post: “If risk markets make new lows, regulators and government officials may have no choice but to close the financial markets to prevent chaos and lasting damage.”
‘Much Stronger Position’
At the opening bell Monday, U.S. equity markets fell more than 7%, triggering circuit breakers to halt trading. Stocks remained lower in afternoon trading, with the S&P 500 index down 9% to 2,466.