Post-financial-crisis regulations and volatility-based risk management have unintentionally increased market instability.
Heightened risk aversion and tighter trading constraints push markets to move in one direction, amplifying turbulence.

2016-04-04
The following is a continuation of the previous chapter.
All emphases in the text, except for the title, are mine.
Assets totaling 130 trillion yen.
According to estimates by JPMorgan Chase, the total assets of funds that invest based on volatility measures, including CTAs, amount to approximately 130 trillion yen.
This exceeds the outstanding balance of publicly offered investment trusts in Japan.
Risk-management methods of this kind spread rapidly in the wake of the financial crisis.
“This has instead made markets more unstable,” says Marco Kolanovic, a strategist at JPMorgan.
When many investors detect risk using the same methods, markets tend to move in a single direction.
Such tendencies can also be observed in market movements since the beginning of the year.
Post-crisis regulatory tightening is another factor behind turbulent markets.
“In the past, we could step in to buy during sharp declines, but now…” says Kyoya Okazawa, Head of Global Markets at BNP Paribas Securities, expressing frustration.
Stricter regulations have made it harder for investment banks’ proprietary trading divisions to take risks.
It is the irony of heightened risk aversion giving rise to unstable markets.
Even as investment techniques become more sophisticated, risk continues to accompany markets in ever-changing forms.