The topic of market disruptions and stock liquidity has become increasingly relevant in IELTS Writing Task 2 examinations, particularly since 2020. Based on analysis of past papers, questions related to financial markets and economic stability appear approximately once every 4-5 test cycles, making it a significant recurring theme.
Stock market trading floor showing digital displays and traders analyzing market disruptions
Analyzing the Task Question
Some people believe that market disruptions like pandemics and natural disasters severely impact stock market liquidity, while others argue that modern financial systems are resilient enough to maintain stable trading conditions. Discuss both views and give your opinion.
This question requires candidates to:
- Examine two contrasting viewpoints about market disruptions’ effects
- Provide supporting evidence for both perspectives
- Present and justify their own position
- Maintain a balanced academic discussion
Sample Essay 1 (Band 8.5)
During periods of significant market disruption, there is considerable debate about whether such events fundamentally impair stock market liquidity or if contemporary financial infrastructure can effectively withstand these shocks. While both perspectives have merit, I believe that major disruptions do temporarily impact market liquidity, though modern systems help markets recover relatively quickly.
Those who argue that disruptions severely affect market liquidity present compelling evidence. When unprecedented events like the 2020 pandemic occurred, many investors simultaneously rushed to liquidate positions, creating massive selling pressure that overwhelmed trading systems. This led to wider bid-ask spreads and reduced market depth, making it harder to execute large trades without significant price impact. Additionally, heightened uncertainty during such periods often causes market makers to reduce their trading activity, further constraining liquidity.
However, proponents of market resilience make valid counterarguments. Modern financial markets employ sophisticated circuit breakers and trading curbs that automatically pause trading during extreme volatility, preventing panic-driven crashes. Furthermore, electronic trading platforms and advanced algorithms help maintain orderly markets even when human traders are physically absent. The quick recovery of market liquidity after recent disruptions demonstrates these systems’ effectiveness.
In my assessment, while market disruptions do create temporary liquidity challenges, today’s financial infrastructure provides crucial stability. The key is distinguishing between short-term volatility spikes, which modern systems can manage, and fundamental market stress that requires intervention. This balanced understanding helps explain why markets can experience brief liquidity crunches yet remain fundamentally robust.
Looking ahead, continued technological advancement in trading systems will likely further enhance market resilience, though the potential for disruption will never be completely eliminated. Therefore, maintaining and improving current safeguards remains essential for preserving market stability.
Modern electronic trading platform showing real-time market analysis and trading tools
Sample Essay 2 (Band 6.5)
In recent years, there has been much discussion about how big market problems affect stock trading. Some people think these problems make it very hard to buy and sell stocks, while others say modern systems can handle these issues. I will discuss both sides and share my thoughts.
People who worry about market disruptions have some good points. When big problems happen, many people try to sell their stocks at the same time. This makes it difficult to find buyers and can cause prices to fall quickly. Also, when traders are scared, they might stop trading, which makes the situation worse.
On the other hand, today’s stock markets have good technology to help prevent problems. They have special rules that stop trading if prices fall too much. Also, computers can keep trading even if human traders cannot come to work. These things help keep the market working properly most of the time.
I think both sides are partly right. While big problems can definitely cause trouble in the stock market, new technology helps fix these problems faster than before. However, we still need to be careful and prepare for future problems that might happen.
Markets will probably get better at handling problems in the future as technology improves. But there will always be some risk when unexpected things happen. We should keep making our trading systems better to protect against these risks.
Analysis of Band Scores
Band 8.5 Essay Analysis:
- Sophisticated vocabulary and complex sentence structures
- Clear organization with well-developed arguments
- Effective use of topic-specific terminology
- Balanced discussion with nuanced opinion
- Strong cohesion and coherence throughout
Band 6.5 Essay Analysis:
- Simpler vocabulary and basic sentence structures
- Basic organization but less sophisticated development
- Limited use of technical terminology
- More general arguments with basic examples
- Some cohesion but less sophisticated linking
Key Vocabulary
- Market liquidity (n) /lɪˈkwɪdəti/ – The degree to which assets can be quickly bought or sold
- Circuit breakers (n) /ˈsɜːrkɪt breɪkərz/ – Mechanisms that temporarily halt trading
- Bid-ask spread (n) /bɪd æsk spred/ – The difference between buying and selling prices
- Market depth (n) /ˈmɑːkɪt depθ/ – The market’s ability to absorb large trades
- Trading curbs (n) /ˈtreɪdɪŋ kɜːbz/ – Restrictions on trading to prevent extreme price movements
Consider practicing with these similar topics:
- The role of technology in financial market stability
- Government intervention in stock markets during crises
- The impact of social media on market behavior
Share your practice essays in the comments for feedback and discussion.
