the times | Wednesday April 8 2020 2GM 39
Business
$6.03 million a year earlier because of a
smaller bonus.
Shares in Plus500 fell 30½p, 2.75 per
cent, to £10.77½ yesterday. Its investors
had been expecting good news after the
company told them in February and
March that it was being boosted byheightened trading activity. Last week
CMC Markets, which twice upgraded
its outlook last month, said that its net
trading revenues from contracts for dif-
ference for the quarter to the end of
March were likely to jump to £214 mil-
lion from £110.2 million a year earlier.Plus500 has put
some of its profit
into sponsoring
Atlético Madrid,
whose players
include Kieran
Trippier, left
Traders turn to exchange’s
daily auctions amid the storm
Analysis
M
arket volatility
is back, and it’s
forcing the
City’s dealers
and fund
managers to rethink the way
they do business (Miles
Costello writes).
The rapidly unfolding
crisis has led to wild
fluctuations in share prices
in sectors from leisure and
hospitality to the world’s
airlines. Traders have been
scrambling to dump their
holdings or frantically
buying shares in businesses,
such as the developers of
tests and vaccines, that look
as though they might be
sudden beneficiaries.
“It’s an amazing time and
it’s a dreadful time, I’ve
never seen anything like it,
not even in the financial
crisis,” one seasoned fund
manager confided last week.
Trading data from the
London Stock Exchange
paints the picture in
numbers. The daily average
value of shares traded on its
markets rocketed last month
as investors tried to reweight
their portfolios. On a
handful of days, shares
worth more than £10 billion
were traded. On March 20,
the figure topped £12 billion,
against last year’s average
value of stock changing
hands of about £4.6 billion.
On the day that the
government ordered pubs,
restaurants and gyms to
close, more than 2.2 billion
shares were traded. That is
way ahead of the 1.7 billion
shares traded on
September 16, 2008, the day
after Lehman Brothers, the
Wall Street bank, collapsed,although by value it is lower
than the £15.8 billion that
was turned over then.
Beneath the giddy figures,
something else is happening.
Funds are turning to the
exchange’s official daily
auctions as a means to move
their holdings.
The exchange holds three
auctions each day: first thing
in the morning, before
markets open; again at
lunchtime; and then right at
the end of the day, just
before the closing price is
set.
The point of the auctions
is not merely to establish
opening, intra-day and
closing prices. It is also
intended to help to keep
markets orderly. However,
funds that previously were
trading off-exchange or were
moving their positions
during the day have turned
en masse to the auctions as a
place to get the best price
and to be able to trade in
large volumes.
“It is wholly transparent
and the pocket of most
liquidity,” one senior trader
at an American investment
bank said, adding that in
recent weeks about a
quarter of all daily share
trading had been taking
place during the auctions.
Experts said that historically
the figure was more like
15 per cent. On March 20,
more than half of all trades
were executed during the
auctions.
Leading fund managers
argue that it is not them
driving this movement. One
said: “Most long-only
managers have got their
hands on their heads,
wondering what the world’s
going to look like when all ofthis finally pans out. What’s
the future? Retail is dead
and online is massive; cash is
dead and travel’s finished. Is
it working from home? Is it
the high street? Is it social
distancing that’s going to be
the future? What’s driving
[trading] is quant funds,
momentum traders, index
trackers and derivatives
dealers.”
Experts said that the rise
of passive investment funds
that need to follow the
weighting of an index, as
well as trading strategies
that follow market
movements, means that
investors need to buy and
sell increasingly large blocks
of shares. The only way that
they can do that,
transparently and at the best
price, is to use the auction
process, they said.
Mark Nelson, an analyst at
Killik & Co, an independent
investment firm, said:
“There is likely to be the
most activity at times when
there’s the most volume.
Trading by trend-following
strategies, exchange-traded
funds and algorithmic
trading will all exacerbate
movements in volatility.”
The stock exchange said
last week that it was
granting more end-of-day
extensions to company share
trading to allow fund
managers to settle on their
final prices more effectively.
It said that the higher
volumes of price monitoring
extensions was in part due to
the sharp increase in traded
products, including funds.
Fund managers welcome
the greater use of auctions
because it has helped to
prevent deliberate market
distortions taking place.JAVIER SORIANO/AFP/GETTY IMAGESBarclays has launched a £100 million
aid package, with the bank’s most
senior executives donating a third of
their fixed pay for the next six months.
A new Barclays Foundation will
provide the multimillion-pound
funding initially to support a Covid-19
community aid package to charities
working to help vulnerable people and
to alleviate associated social and
economic hardship.
Jes Staley, 63, the bank’s chief execu-
tive, Nigel Higgins, 59, its chairman,
and Tushar Morzaria, 51, the finance
director, will give 33 per cent of their
base pay for six months, with those
donations being matched by the bank.
In Mr Staley’s case, the donation of a
third of his fixed pay over the period
would amount to about £392,000, or
just under 7 per cent of the £5.9 million
that he earned in 2019.
Barclays, which has about 24 million
customers and almost 50,000 employ-
ees in the UK, traces its ancestry back to
John Freame and Thomas Gould, two
goldsmith bankers who were doing
business in Lombard Street in the City
of London in 1690. In 1736, Freame’s sonA crackdown on dividend payments by
insurers in Europe threatens to com-
plicate Aviva’s plan to pay £839 million
to its shareholders.
The FTSE 100 company has declared
a 21.4p-a-share final dividend for 2019
that is due to be given to its investors on
June 2.
However, a mounting row about the
appropriateness of shareholder returns
during the Covid-19 crisis has raised
uncertainty over whether Aviva’s
French business can pay a dividend to
its parent, which in turn calls into
question the payout for shareholders.
Aviva, which is led by Maurice
Tulloch, 51, is one of Britain’s biggest life
and general insurance businesses. It
was created from the merger in 2000 of
Norwich Union and CGU. Its dividend
is central to the appeal of its shares for
more than 500,000 small private inves-
tors, who are largely a legacy of the de-
mutualisation of Norwich Union in
Last week the European Insurance
and Occupational Pensions Authority,
the European Union regulator, urged
insurers to suspend dividends and
share buybacks to conserve reserves.
The advice was backed by the French
financial services watchdog and could
Aviva’s £839m payout placed in doubt
Ben Martin, Patrick Hosking complicate any payments that Aviva’s
French subsidiary is due to make.
Aviva said in its annual results on
March 5 that cash remittances from its
European life business for 2019 totalled
£414 million. Jason Windsor, 47, finance
chief, said at the time that it “had a small
remittance out of France”. The size is
unknown and it is unclear whether it
has been received by the parent.
Last week Sam Woods, head of the
Bank of England’s Prudential Regula-
tion Authority, wrote to British insurers
to tell boards considering distributions
that they were expected “to pay close
attention to the need to protect policy-
holders and maintain safety and sound-
ness, and in so doing to ensure that their
firm can play its full part in supporting
the real economy” during the crisis.
At the same time, the regulator
blocked banks from paying their final
dividends for 2019 to shareholders.
Aviva said in March, before the
interventions, that it still planned to
pay its final dividend despite the recent
decline in its capital strength because of
falling stock markets and interest rates.
Legal & General said last week that it
was pressing ahead with a £753 million
dividend on June 4.
Shares in Aviva rose 20¾p, or 8.4 per
cent, to 266¾p last night. An Aviva
spokeswoman declined to comment.
Glencore hits pause
Glencore is mothballing its copper
mining operations in Zambia today
in response to the drop in prices and
transport restrictions (Emily Gosden
writes). However, the decision to
place its majority-owned Mopani
operations into “care and
maintenance” caused a row with the
country’s government, which said
that the move was illegal and
threatened to block it.
Glencore is one of the world’s
biggest miners, with more than
160,000 staff and contractors. Its
African copper operations are seen
as a key growth area, but have faced
difficulties in recent years.
Mopani Copper Mines, Glencore’s
Zambian subsidiary, said: “The
operating, regulatory and macro-
economic environments remain
very challenging and have
continued to place significant
pressure on the business.” It
employs about 5,000 people at
Mopani, who will be paid their base
salary and healthcare. About 9,000
are expected to lose their jobs,
although it said that they would
receive an “ex gratia” payment.Chiefs join in Barclays’
£100m virus aid effort
Robert Miller
Joseph took on his brother-in-law,
James Barclay, as a partner and the
name has stuck since then.
The new foundation will have two
elements. A corporate contribution of
£50 million will be used to support vul-
nerable people, with the money being
disbursed principally in Britain, but
also in Barclays’ international markets,
including the United States and India.
Barclays also has made a £50 millioncommitment to match personal
donations made by the bank’s employ-
ees to charities of their choice, local to
them, and tht are working to support
communities affected by the crisis.
Mr Staley, an American who hails
from Boston, said: “We want to do more
to back the communities in which we
live and work and to provide help to
those who have been hardest hit by the
consequences of the coronavirus
pandemic.ӣ392,000
Potential amount set to be donated by
Jes Staley, Barclays’ chief executive