There has been a specific brand of conventional wisdom circulating in Wall Street and retail trading every four years. It says that when the World Cup kicks off, financial markets enter a state of suspended animation.

The notion rests on the idea that people collectively set down their phones to pick up a cold beer and hold their breath while the Video Assistant Referee takes its sweet time deciding on a handball in the six-yard box.

As the 2016 World Cup is about to kick off, we worked with FM Intelligence to examine retail engagement and institutional volumes across the last three tournaments.

Our window of observation stretched from one month before the opening whistle to one month after the trophy was hoisted. We then compared the average activity in those periods to the same months in the years immediately preceding and following the cup.

If traders were truly distracted, we would see a uniform slump every four years. But like many things in finance, reality is a tad more complicated than a simple game of two halves.

The Pitch Over the Pit

The distraction narrative has its roots in reality, but it does not hit everyone at the same time. During the 2014 tournament in Brazil, professional trading records saw an 8.5% year-on-year drop, suggesting the big desks were indeed preoccupied.

The retail crowd, though, was busy, with FX volumes rising by 23% compared to the surrounding years. It seems the amateurs were happier to trade than their professional counterparts.

The 2018 World Cup in Russia provided the strongest evidence for a retail retreat. Here, retail currency contracts dived by 35.9% year-on-year.

Meanwhile, the number of active traders in the CFD brokers we sampled actually grew by 7.1%; fans were still logged into their apps.

The professionals, meanwhile, remained unmoved, showing a modest 3.3% increase in volume.

The Qatari Contradiction

The 2022 tournament in Qatar was a statistical outlier, and there’s a good chance it was due to the calendar.

By moving games to the winter, the tournament collided with a period of traditional year-end volatility. The data showed a 10% month-on-month pause as the games began, but when compared to the years before and after, the retail crowd was actually 8.4% more active.

Nonetheless, it appears that a retail trader is perfectly capable of keeping an eye on a penalty shootout while simultaneously managing a position in the yen.

When the Match Becomes the Market

It’s worth mentioning the evolving nature of the industry.

The introduction of prediction markets, where brokers like Plus500 allow users to trade on match outcomes as if there were any other asset, suggests that sport in the 2026 World Cup in North America will be folded into the markets.

As the tournament prepares to commence in Mexico, the sheer scale of the engagement is staggering. On Polymarket, contracts regarding the eventual champion have already climbed past the US$1.8 billion mark, while Kalshi, catering more specifically to the American audience, has seen its own pools reach approximately US$120 million.

It is highly likely, then, that during this World Cup, trading will coexist with the beautiful game more so than ever before.

This article was written by Adonis Adoni at www.financemagnates.com.Retail FXRead More

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