This article discusses a market scenario wherein the CFD NYSE trades at par with the CFD NASDAQ. It was published in CFD News on September 30, 2020.
During the year 2020, a geopolitical earthquake occurred in the European market, provoking an international conflagration in the government bond markets. The European sovereign debt crisis was closely related to the USA sovereign debt crisis, causing massive fear in the market and a massive selling pressure. Several European governments were forced to come up with additional amounts to finance their debt financing, and Eurozone crisis worsened by the looming sovereign debt crisis. Market access was also closed in the Asia market.
The problem with the Eurzone crisis is that since some of the sovereign debt securities had negative yield in the first place, while some of the Eurozone government bond issuers were given guarantees from the EU, these massive investor fears resulted in massive selling pressure and the pullback by the CFD NASDAQ. This situation also resulted in the CFD NYSE taking a huge loss, since it was the largest market participant in the EURUSD equity.
This led to the second problem – the demand for the CFD markets was low, since there was no interest rate spread. Since the CFD was a contract which permit investors to obtain the derivatives at par, but at much lower price, investors demand that they receive the risk-free cash from these contracts.
Since these parties together with the strong demand for the CFD NYSE generated massive flow of liquidity into the market, that was not affordable for the other foreign central banks, the FED, BIS, etc. Therefore, the country that has the greatest number of CFD contracts was the US.
CFD NYSE will now have access to the capital from the large exchange with the lowest liquidity. US regulatory agencies are also sharing information with the CFD NYSE. So, the CFD NYSE is indeed bound by the institutions of the USA.
You can argue that the problem of CFD NYSE cannot be solved by adding more liquidity, because there is a loss of value dollar indices to the value dollar assets. Indeed, this possibility is there.
However, an interesting thing occurred – the major liquidity providers of the international banking sector gave more transparency to the CFD markets. The banks are now accepting payments of CFD from customers with secured credit cards. Moreover, the bank guarantees that the CFD does not provide financing for the country of origin, so they help to remove the pressure of the poor performance of the economic performance of the country of origin.
In other words, this new institution – the CFD NYSE can now prosper in the international market for the betterment of the economic performance of Europe. It provides this trade to the economy in Europe at lower price.
So, in a way, we can say that the government of USA had a mistake of accommodating the sovereign debt crisis, allowing the spread between Euro and US dollar to increase. The banks, the government and some financial institutions had a substantial risk on the behavior of the economy. The USDX index was forced to increase by its closing amount, causing EURUSD to decrease, causing a loss of value.
So, there is a new course of action for the financial institutions of the US. It is no longer a choice of investing in the euro dollar but to invest in the CFD NYSE.