Sep 22, 2016

9/11 Bill Veto and Market Volatility

I just left a panel discussion event organized by Sigma Analysis and Management and wanted to share one thing with the readers. The star of the panel was Nancy Davis of Quadratic Capital, a veteran volatility manager. She was head above other panelists on volatility trading, and provided no fluff technical answers - a rare thing for discussion panels.

When asked on upcoming events Ms Davis suggested the following potential catalyst: recently passed hot-button issue of 9/11 bill that strips sovereign immunity off Saudi Arabia and would allow victims of terrorism to sue the country. President Obama promised to veto the bill, which he must do within  ten days. The bill was passed 9 days ago, and the deadline is tomorrow, the 23rd. Congress also is poised to override the veto.

While on the surface it is a mostly political event, it can have very serious financial consequences. Saudi Arabia, through various investment vehicles is a major! investor in US equities, debt, hedge funds, real estate, etc. If the president does not veto the bill, or Congress overrides the veto we could see a significant selloff due to outflow of investment funds from US across assets, potentially a few forced liquidations, and it could also jeopardize Saudi Aramco IPO.

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