Impact on Compliance Frameworks

The U.S. Securities and Exchange Commission (SEC) may move to semi-annual earnings reporting, which could change how companies comply with regulations. This shift might make the market less transparent. According to TD Cowen, there is a 60% chance this change will happen, with strong support from political and industry leaders. Lobbying from the Long-Term Stock Exchange and backing from former President Trump add momentum to this long-awaited change. SEC Chair Paul Atkins could play a key role in advancing this policy. Changing the reporting requirements might take over six months. While the market has not yet adjusted to this possible shift, it could be viewed as a win for the Trump administration. Discussions about moving away from quarterly reporting have been ongoing, with recent updates showing growing support from various stakeholders. Currently, there’s a 60% chance the SEC will switch from quarterly to semi-annual earnings reports. This change would significantly impact how information flows in the market. Although not yet factored into prices, the strong political support suggests traders should prepare for a change in how market-sensitive information is released.

Anticipated Effects on Market Volatility

The main impact of having less frequent reporting will be increased uncertainty between earnings dates, leading to higher implied volatility. We expect option premiums, especially for contracts longer than three months, to rise as the possibility of this change becomes more apparent. This shift will make holding options more costly, but it may also offer greater rewards. Right now, the VIX index is around 15, indicating a calm market that hasn’t yet accounted for this potential increase in volatility. This situation could present a buying opportunity in the coming weeks, allowing traders to acquire volatility at lower prices before it rises. Transitioning to semi-annual reports could create a new, higher baseline for the VIX index in the long term. Looking at European markets offers historical insights into this reporting structure. Leading up to 2025, stocks on the London Stock Exchange often experienced larger price swings on earnings days compared to those in the U.S. This implies that less frequent earnings updates lead to more explosive market reactions. For traders, strategies that benefit from large price movements—like long straddles and strangles—will become more appealing around the two annual reporting periods. Expected larger price shifts will increase premiums for these strategies, while also providing a better chance for significant gains. Conversely, selling volatility during these key times will be riskier. The impact of this shift will vary across sectors. High-growth technology or biotech stocks, which investors carefully watch every quarter, will likely see the biggest increase in volatility between reports. Meanwhile, stable, mature companies in industries like utilities may experience a smaller effect on their option pricing. The formal rulemaking process for this change is expected to take six months or longer, so this transition won’t happen immediately. This timeframe allows traders to gradually adjust their positions and incorporate a new volatility environment into their pricing models. It might be wise to start building long volatility exposure using instruments like VIX futures or longer-dated options on indexes like SPX and NDX. Create your live VT Markets account and start trading now.

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