The U.S. financial markets have experienced considerable volatility over the past few months, driven by a mix of economic uncertainty, interest rate hikes, inflation concerns, and rising geopolitical tensions. As the markets fluctuate dramatically, trading firms are grappling with challenges that were previously unimaginable in terms of capacity and volume.
“The biggest challenges firms are facing today revolve around capacity and volume—especially when it comes to market data and trading activity,” Adam Cohn, VP and Head of Trading Operations at TradeStation, told Traders Magazine.
He explained that the current level of market activity is nearing the extreme end of the expected range: “Many firms haven’t experienced this kind of volume since the early days of COVID-19 in March 2020 or during the peak of the meme stock frenzy.”
On April 7, 2025, the market reacted sharply to the announcement of additional tariffs. The Dow Jones Industrial Average fell 600 points, and the Nasdaq Composite also saw significant downturns.
Michael O’Rourke, Chief Market Strategist at JonesTrading, confirmed the extreme nature of market movements: “Just this morning, the S&P 500 rallied 8.6% in 30 minutes, only to fall 5.5% in the following 25 minutes. It doesn’t get more volatile than that.”
As market swings become more pronounced, firms face the dual challenge of maintaining liquidity while managing risks associated with extreme price movements. The volatility is further amplified by the need to stay ahead of news events that drive these fluctuations.
“Our role is to serve as an extension of our clients’ trading desks,” said O’Rourke. “We are always monitoring market intelligence that drives price movements. We have a dedicated team doing this throughout the day.”
The ongoing market volatility was cited at the Security Traders Association of New York’s (STANY) annual conference, held April 7 at the New York Stock Exchange.
Despite the turmoil, many speakers observed that the market infrastructure has remained resilient. One speaker said, “Everything seems to be working,” underscoring the stability provided by exchanges even as volatility spikes.
Conference speakers noted that as per usual during times of turmoil, market participants have moved some volume to exchanges, where there is a greater certainty of execution compared with alternative trading venues.
This trend has been particularly pronounced in the options and futures markets, where daily volumes have surged.
“During periods of increased volatility, it is normal to see an uptick in on-exchange liquidity as investors look for certainty of execution,” said Oliver Sung, Head of North American Equities at Cboe Global Markets, a speaker on the Exchange Leaders panel at STANY.
He added that, following a significant selloff last week, on-exchange volume made up over 50% of total industry volume on Thursday and Friday. For the month, TRFs (Transaction Reporting Facilities) still represent 50.2% of market share amid the high levels of trading from both professional and retail investors.
The announcement of new trade tariffs on April 3, 2025, sparked a massive spike in market activity. According to CME Group, total trading volumes reached $326 billion across FX futures, options, and cash markets. This seismic shift was especially evident in futures markets, particularly S&P 500 futures, where traders sought to adjust their positions in response to the evolving trade situation.
A notable trend has been the rise of zero-day-to-expiry (0DTE) options. These short-term options gained significant traction on April 4, as traders adjusted their strategies to respond swiftly to the tariff news. Cboe Global Markets reported a remarkable 77% increase in options volume on April 4, surpassing 100 million contracts for the day. Of these, 52 million were put options, double the average daily volume, as investors sought to hedge against the heightened volatility.
Amid these turbulent times, retail investors have remained active participants in the market. On April 3, 2025, retail investors set a record by purchasing $4.7 billion in stocks and ETFs, with investments split almost evenly between individual stocks ($2.3 billion) and ETFs ($2.4 billion).
Steve Sosnick, Chief Strategist at Interactive Brokers, observed that retail investors have remained optimistic and active despite the market’s volatility. “Our customers seem quite willing to buy dips and fear missing rallies,” he noted.
“The bias remains on the buy side.” He pointed out that 24 out of the top 25 most-traded names at his firm saw net buying activity over the past week, with Nvidia (NVDA) and the S&P 500 ETF (VOO) receiving the largest inflows.
Despite the market’s volatility, retail investors have demonstrated resilience, sticking to their long-term favorites. “Even in periods of heightened uncertainty, our customers have not lost faith in their old favorites,” Sosnick said.
Accordingly, retail-dominated overnight trading has been busy: executives of at least two brokerage platforms said at STANY conference that they set volume records in the April 6/7 overnight session.
Despite the challenges posed by extreme price movements, the resilience of market infrastructure and the adaptability of trading firms will continue to be key factors in maintaining liquidity and stability in the U.S. financial markets.
