Breaking news: Silicon Valley Bank collapse
The context: Silicon Valley Bank (SVB) was one of America’s 20 biggest banks since its founding in the early 80s, and a key lender to the California VC and tech space. This means its insolvency massively affects the tech industry, companies in the tech-heavy Nasdaq, and the many cryptocurrencies (including Ripple, and some stablecoins) which were exposed to the bank.
What it means for traders: The unexpected news has caused lots of volatility in the market. Traders can no longer directly short SVB, which was closed to traders on Friday, upon its insolvency. However, there are scores of traders speculating on banking shares in general – particularly other smaller, regional banks such as First Republic Bank – as well as affected cryptocurrencies with exposure to SVB like Ripple and US indices like the S&P 500, Nasdaq and Dow Jones.
Why did Silicon Valley Bank collapse? On Wednesday 8 March, SVB issued a statement saying that it had sold “approximately $21 billion of securities” and planned to sell a further “$1.25 billion of its common stock and $500 million of depositary shares”. The share price nosedived over 60% in the next 24 hours.
On Friday 10 March, regulator DFPI (the California Department of Financial Protection and Innovation) announced in a short press release on its website that it “has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency”.
The market experienced rampant volatility over Friday and the weekend. On Sunday 12 March, the Federal Reserve and DFPI announced a backstop for SVB depositors, as well as an emergency liquidity facility for other banks exposed, sparking an initial rebound in risk sentiment at the Asia open, though this has sine fizzled amid a renewed bout of contagion worries upon the opening of European markets.
What you can trade:
Trade CFDs on the MT5 platform with Pepperstone on the following banks:
First Republic Bank/CA
JPMorgan Chase & Co
Bank of America Corp
Wells Fargo & Co
Lloyds Banking Group PLC
Fifth Third Bancorp
Huntington Bancshares Inc/OH
M&T Bank Corp
Northern Trust Corp
PNC Financial Services Group I
Bank of Ireland Group PLC
HSBC Holdings PLC
NatWest Group PLC
Standard Chartered PLC
Virgin Money UK PLC
Deutsche Bank AG
Hang Seng Bank Ltd
Industrial & Commercial Bank o
BOC Hong Kong Holdings Ltd
China Merchants Bank Co Ltd
Bank of China Ltd
HSBC Holdings PLC
China Construction Bank Corp
Australia & New Zealand Banking
Bendigo & Adelaide Bank Ltd
Bank of Queensland Ltd
Commonwealth Bank of Australia
Link Administration Holdings L
Macquarie Group Ltd
National Australia Bank Ltd
Virgin Money UK PLC
Also trade on indices with CFDs on the MT5, TradingView and MT4 platforms:
S&P 500 (called the US500 Index on our platform)
NASDAQ (called the NAS100 US Tech 100 Index on our platform)
Dow Jones (called the US30 US Wall Street 30 Index on our platform)
VIX (called the US Volatility Index on our platform)
DAX 40 (called the GER40 Germany 40 Index 1 on our platform)
FTSE 100 (called the UK100 on our platform)
CAC 40 (called the FRA40 France 40 Index on our platform)
ASX 200 (called the AUS00 on our platform)
Hang Seng (called the HK50 Hong Kong Index on our platform)
Certain Pepperstone clients may also speculate on cryptocurrency Ripple, which had direct exposure to SVB, and many other biggest cryptocurrencies around the world, including Bitcoin and Ethereum.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients. Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.