Bunk beds in the office! London’s FX traders prepare to spend the night at work as Brexit panic sets in
Sleeping bags, takeaway food, special dealing rooms and the Bank of England as a makeshift ‘market maker’ – The City is rooting for those spending the night in the office to ensure that they trade at the right time during Brexit voting day.
London’s interbank FX sector, the largest in the world, is a hive of activity tonight as some of the largest financial institutions in the world rent bunk beds on which traders can catch a very small amount of essential sleep as they work through the night to attempt to catch the market at exactly the right time as the result of Britain’s referendum on European Union membership becomes known.
Interbank FX traders are equipped with sleeping bags and takeaway food that has been ordered by their employers in order that they are at their desks at the critical point where they can cash in on the potential currency movements which may ensue once the result is revealed and votes are counted.
As the day has progressed, and Britain’s electorate has battled severe rain and flooding across the country to cast votes, the regular updates on polling has shown that a potential exit from the European Union is not able to be gauged, even at this late stage, with voting being equally split between the leave and remain camps, therefore banks are positioning their traders in their seats all night.
Some banks have commissioned private exit polls so that they can potentially make a profit on placing large trades which depend on the outcome prior to the official announcement of the result which is likely to be made in the early hours of tomorrow morning.
Emergency meeting rooms have been made available for senior traders to get together to assess how to execute positions during this potentially volatile period, and dealing rooms have been set up for traders to work extra hours.
British regulatory authorities have instructed major banks to ensure that ATM machines are filled in order to avoid pre-financial crisis style bank runs which were omnipresent nine years ago at the beginning of the credit crunch.
Among interbank FX dealers that have instructed their traders to work through the night are JPMorgan, Citigroup (the world’s largest FX dealer by market share), Goldman Sachs and Morgan Stanley, the institutions considering their FX desks to be of greatest importance because FX is where the greatest profit percentage is at stake.
Voice brokerage is making a come back- tonight.
Voice brokerage is coming back into force tonight, largely as a means of risk management insofar as a human trader handling the transactions to avoid computerized electronic trading systems executing orders too quickly which could be unwise at times of very high volatility, whereas other banks are setting in place algorithmic trading systems which have a ‘dead man’s handle’ meaning that an employee can intervene and override the system.
On these particular algorithmic desks, constant supervision by traders will be required during the course of the night to ensure that the algorithms are conducting the right trades, and alertness will be required in case intervention is needed.
Thus far, UBS, HSBC, Morgan Stanley and Bank of America Merrill Lynch have written to clients advising of market disruption when the EU referendum result has been revealed, therefore it is perhaps worth considering that the extension of credit by these banks to prime brokerages may be monitored and risk management measures put in place, potentially filtering down to the liquidity feeds received by retail FX brokerages.
For those working through the night in London’s largest institutions and maintaining a watchful eye on the markets, responsibility is vast and whilst the commercial structure in London is very well organized, with the Bank of England ready to step in to become a last resort market maker if necessary, we are all no doubt thinking of the concentration and effort that is being put in as the night goes on, for those traders at the very coal face of the world’s FX industry, who are doing their bit to not only generate profit for their employers, but to keep the entire FX ecosystem from bank to prime broker, to retail FX firm, on as much of an even keel as is humanly (or algorithmicly!) possible.