On March 7th Nasdaq has decided to call for stressed market conditions in derivatives on Intrum, one of the main player in debt purchasing and debt collection with headquarter in Sweden – For four hours, after which time an assessment of market conditions will be made to determine if stressed market conditions are still valid. Stressed market conditions in derivatives is called for when the underlying asset to a derivative experience high and short term intraday volatility or when other factors causes high uncertainty in the pricing of derivatives. When stressed market is called for it means that market makers are allowed to quote prices with double the normal spread.
The notion of stressed market conditions is not novel but is seldom utilized, rendering Nasdaq’s choice especially remarkable. This is activated when the underlying asset of a derivative, demonstrates swift and substantial price shifts within the trading day or when other factors contribute to increased uncertainty in derivative valuation. By permitting a broader spread in quoted prices, Nasdaq seeks to offer market makers a cushion against rapid market fluctuations, thus promoting a more resilient trading atmosphere.
