- Australia’s economic situation has worsened significantly in recent months on the back of the coronavirus outbreak and several weaknesses in commodity prices. Given the latest developments, we are now looking for the Australian economy to contract 2.2% for the full year 2020, marking the first recession since the early 1990s.
- The Australian Government announced major fiscal stimulus measures aimed at supporting businesses and households in response to the recent pandemic. This includes an additional fiscal expenditure of A $ 194B (almost 10% of GDP), as well as measures to support the flow of credit. On the monetary policy side, the central bank cut interest rates to an all-time low of 0.25% in March and implemented several unconventional policy measures including a quantitative easing program.
- The Australian dollar has weakened more than 13% since the start of the year, and besides the Norwegian krone, it is the worst performing G10 currency this year. We expect some further decline in the Australian dollar before finally stabilizing.
Australia’s Most Gloomiest Economy Since 1991
In recent months there have been significant developments in the Australian economy, with the prospect of sharply weakening amid a corona virus outbreak and with commodity prices under some pressure. Recently, the Australian government joined with its international partners in implementing stricter measures to curb the spread of the corona virus which has infected more than 5,700 people throughout the country. The government is extending the closure of unnecessary services by banning foreign travel, closing most businesses and limiting large events such as funerals and marriages. With service and business closures not important, the labor market is likely to be depressed significantly in the next few months. Equally, these major disruptions to economic activity are likely to drag growth to full 2020.
Recently, the stock market has experienced a high level of volatility. If you are thinking of participating in a fast-moving market, please take the time to read the information below. Wells Fargo Investments, LLC will not limit fast-moving securities trading, but you must understand that there will be a significant additional risk to trading on a fast market. We have tried to describe the problem so that you can better understand the potential risks.
If you are not sure about fast market risks and how they can affect certain trades that you are considering, you might want to place your trades through telephone agents at 1-800-TRADERS. The agent can explain the difference between markets and limited orders and answer every question you have about trading in a volatile market.
Higher Margin Maintenance Requirements for Volatile Issues
The wide swing in intra-day trading also requires the maintenance requirements of higher margins for certain stocks, especially the Internet, e-commerce and high-tech issues. Because of their high volatility, some of these stocks will have initial and maintenance requirements of up to 70%. The stock is added to this list every day based on market conditions. Please call 1-800-MERCHANT to check whether certain stocks have higher margin maintenance requirements.
Please note: this higher margin requirement applies to new purchases and current ownership. Changing margin requirements for current holding may result in margin maintenance calls on your account.
A fast market is characterized by heavy trading and very volatile prices. These markets are often the result of imbalanced trade orders, for example: all “buy” and no “sell”. Many types of events can trigger a fast market, such as the highly anticipated Initial Public Offering (IPO), important company news announcements or analyst recommendations. Remember, fast market conditions can affect your trade regardless of whether they are placed with an agent, via the internet or on a touch-tone telephone system.
In Fast Market, service response and account access time can vary due to market conditions, system performance, and other factors.
Potential Risks in the Fast Market
“Real-Time” Price Quotes May Not Be Accurate
Prices and trades move very fast in fast markets so there is a significant price difference between the offer you receive one time and the next. Even “real-time quotes” can be far behind what is currently happening in the market. The size of the quote, which means the number of shares available at a certain price, can change quickly. Real-time quotes for fast-moving stocks may indicate more of what has happened in the market than the price you will receive.
Prices and Your Execution Orders Ahead
In a fast market, orders are handed over to market makers and specialists at such a rapid pace that piling up can create significant delays. Market makers can place orders manually or reduce size guarantees during periods of volatility. When you place a market order, your order is executed on a first-come, first-serve basis. This means that if there is an order in front of you, the order will be executed first. Execution of orders in front of you can significantly affect the price of your execution. Market orders that you submit cannot be changed or canceled after the stock begins trading.
Initial Public Offering may be Volatile
IPOs for some internet, e-commerce and high-tech issues may be very volatile when they start trading in the secondary market. Customers should be aware that market orders for this new public company are executed at the current market price, not the initial bid price. Market orders are executed completely and immediately, regardless of price and in a fast market this can result in execution that is very different from the current price quoted for that security. Using a limit order can limit your risk of accepting an unexpected execution price.
Large Orders on the Fast Market
Large orders are often filled with small blocks. Orders for 10,000 shares will sometimes be executed in two blocks of 5,000 shares each. In the fast market, when you order 10,000 shares and a real-time market quote shows there are 15,000 shares at 5, you will expect your order to be executed at 5.
In a fast market, with heaps of orders, real-time offers may not reflect the state of the market at the time your order was received by market makers or specialists. After an order is received, it is executed at the best price available, depending on how many shares are offered at each price. A volatile market can cause market makers to reduce the size of collateral.
This can cause your large orders to be filled with unexpected small blocks and at very different prices. For example: an order for 10,000 shares can be filled as 2,500 shares at 5 and 7,500 shares at 10, even though you receive a real-time offer indicating that 15,000 shares are available at 5. In this example, the market moves significantly from the time the “real time” market quote is received and when the order is submitted.
Online Trade and Duplicate Orders
Because fast markets can cause significant delays in the execution of trades, you may be tempted to cancel and resubmit your order. Please consider this delay before canceling or changing your market order, and then resubmit. It is possible that your order may have been executed, but due to delays on the exchange, it has not been reported. When you cancel or change and then resubmit market orders in the market quickly, you risk taking duplicate orders to be executed.
Limit Orders Can Limit Risk
A limit order sets a “purchase price” at the maximum limit that you are willing to pay, or “selling price” at the lowest price you are willing to accept. Placing a limit order instead of a market order can reduce your risk of receiving an unexpected execution price. A limit order does not guarantee that your order will be executed – “however, it guarantees that you will not pay a higher price than you expect.
Telephone and Online Access During the Volatile Market
During times of high market volatility, customers may experience delays with the Brokerage Wells Fargo Online website or longer waiting times when calling 1-800-MERCHANT. It is possible that losses can be suffered due to difficulties in accessing the account due to high internet traffic or long waiting times to talk with telephone agents.
Freeriding is prohibited
Freeriding is when you buy low security and sell high, on the same trading day, but use the proceeds of the sale to pay for genuine security purchases. There are no restrictions on daily trading, but you must avoid freeriding. To avoid freeriding, funds for the purchase of genuine securities must come from sources other than the sale of securities.
Freeriding violates the Federal Reserve Board’s T Regulations regarding credit extension by broker-dealers (Wells Fargo Investments, LLC) to its customers. This penalty requires the customer’s account to be frozen for 90 days.
Stop and Stop Limit Orders
Stop is an order that becomes a market order after the security is traded through the selected stop price. You are guaranteed a execution. For example, you order to buy at a stop of $ 50 that is above the current price of $ 45. If the stock price moves to or above the stop price of $ 50, the order becomes a market order and will be executed at the current market price. Your trade will be executed above, below or at a stop price of $ 50. In a fast market, the execution price can be very different from the stop price.
“Sell stop” is very similar. You have a stock at the current market price of $ 70 per share. You place a sell stop at $ 67. If the stock drops to $ 67 or less, trading becomes a market order and your trade will be executed above, below or at a stop price of $ 67. In a fast market, the execution price can be very different from the price stop
A stop limit has two main differences from a stop order. With a stop limit, you are not guaranteed to get an execution. If you get an execution on your trade, you are guaranteed to get a price limit or better. For example, you order to sell shares that you have at the stop limit of $ 67. If the stock drops to $ 67 or less, trading becomes a limit order and your trade will only be executed at $ 67 or better.
All or Nothing (AON)
Provisions regarding buying or selling orders that instruct the broker to fill all orders or not fill them at all; but in the latter case, don’t cancel, as the broker does if the order is fulfilled or killed.
Order of the Day
Buy or sell orders that automatically expire if not executed during the trading session.
Fill or Kill
Orders placed must be filled immediately or, if not possible, fully canceled.
Good Til Canceled (GTC)
Orders to buy or sell that remain valid until executed or canceled (WellsTrade® account has a 60 day limit, after which we will automatically cancel the order).
Immediately or Cancel
Order conditions that require all or part of an order to be executed immediately. Parts of orders that cannot be executed immediately are canceled.
An order to buy or sell a certain amount of security at a certain price or a better price (higher for sales or lower for purchases).
A call from a broker demanding cash or securities to meet the requirements of T Regulations and / or House Maintenance Requirements. This can occur when the customer’s margin account balance falls below the minimum requirements due to market fluctuations or other activities.
The minimum amount the client must deposit in cash or securities that meet the requirements in a margin account as outlined in the Federal Reserve Board T Regulations. Reg. T requires a minimum of $ 2,000 or 50% of the purchase price for eligible securities purchased on margin or 50% of the proceeds from the short sale.
NASD member companies that buy and sell NASDAQ securities, at prices displayed on NASDAQ, for their own accounts. At present there are more than 500 companies that act as NASDAQ Market Makers. One of the main differences between the NASDAQ Stock Market and other major markets in the U.S. is the NASDAQ structure of competitive Market Makers. Each Market Maker competes for the flow of customer orders by displaying buy and sell quotes for the guaranteed number of shares. After an order is received, Market Maker will immediately buy or sell from its own inventory, or search the other side of the trade until it is executed, often in seconds.
An order to buy or sell the stated amount of a security at the best price available at the time the order is received on the trading market.
Specialist companies are securities companies that hold seats on the national stock exchange and are tasked with maintaining an orderly market in securities where they have exclusive franchises. They buy securities from investors who want to sell and sell when investors want to buy.
Orders that become market orders after security is traded through the specified stop price. Stop orders are entered above the current asking price. If the price moves to or above the stop price, the order becomes a market order and will be executed at the current market price. This price may be higher or lower than the stop price. Sell stops are entered below the current market price. If the price moves to or below the stop price, the order becomes a market order and will be executed at the current market price.
Stop the Limit
Orders that become order limits after security is traded at the specified stop price. A stop limit order instructs the broker to buy or sell at a certain price or better, but only after the given stop price is reached or passed. This is a combination of a stop order and a limit order.
These articles are for informational and educational purposes only. You need to evaluate the benefits and risks associated with relying on any information provided. Although this article can provide information relating to investment approaches or types of securities and investments that you may buy or sell, Wells Fargo and its affiliates do not provide investment recommendations, advice, or support. Data has been obtained from what is considered a reliable source; however, its accuracy, completeness, or reliability cannot be guaranteed. Wells Fargo makes no warranties and is not responsible for your use of this information. The information provided to you is not intended, and should not be interpreted as legal advice, tax or investment, or legal opinion.
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