Why the British Pound 'flash crash' is a fantastic opportunity - Op Ed

Why the British Pound ‘flash crash’ is a fantastic opportunity – Op Ed

The bonus cap is now off, and traders at Tier 1 banks are free to conduct their business without boundaries as far as remuneration is concerned.

Britain is rapidly becoming not only the world’s most important economy, but also a region which hosts the largest financial center on earth – London – and has the most sophisticated electronic trading ecosystem on the planet, with Tier 1 banks, prime of primes, and retail FX brokers with 30 years of market presence and several billions in market capitalization, operated by seasoned industry professionals with detailed understanding of the market.

Venture capital interest in British startups is at an all-time high, with ‘Brentry’ being a phrase coined by those wishing to enter the British corporate arena following the country’s vote to go it alone as a beacon of commercial and technological success, freed from the burden of having to play a major role in sponsoring a non-productive, bureaucratic and outmoded mainland Europe.

The FTSE 100 is experiencing tremendous highs as astute investors pledge their confidence in British blue chip companies.

London’s financial technology and institutional electronic trading sectors are being stimulated even further by a government that ensures that they prosper, and that no corporation tax is payable by companies that commit a certain amount of resources to research and development. The ‘brains of Britain’ are back in force, largely powering the City’s financial markets business.

The bonus cap is now off, and traders at Tier 1 banks are free to conduct their business without boundaries as far as remuneration is concerned.

Yet the pound is at a 30 year low.

Too much emphasis on this has appeared in cyberspace in the form of unresearched noise has been propagated over the last few days, and indeed the low value of the pound is actually a fantastic opportunity that has never been such an attractive proposition for investors.

Usually, low value of currency can be correlated to poor economies, government corruption or lack of progress and economic development.

In Britain, the absolute opposite is true. Britain is now once again leading the world’s markets, developing the latest and most advanced financial markets systems, and is standing alone, free from European fiscal burden and anti-business bureaucracy to flourish. The stock market and housing markets have shown this. Consumer spending has shown this.

The real reason that the Pound is at a low point is that Britain now has to renegotiate all of its cross-border deals with other nations which may take a year or so, in order to stand as a separate and independent nation.

Indeed, the Pound remained the nation’s sovereign currency during its EU membership, but governance and answerability to a European Parliament and deep interaction with the European Central Bank as an integral component were part and parcel of Britain’s EU membership.

Now, liquidity arrangements, cross border transaction accountability, clearing and regulatory structures will have to be set out. This means a degree of Pound volatility, whilst the rest of the economy booms.

An additional factor is that the level of automation which interbank and institutional trading in London now relies on means that the speeds of execution are very high. At times of volatility such as the period during which Britain adjusts itself to independence from the EU could mean that algorithmic trading in the City could have contributed to the ‘flash crash’ in which the pound plunged by as much as 6% against the dollar during trading in Asia late last week. The pound fell to $1.18 in a matter of minutes, hitting a 31-year low at one point, before recovering to $1.24.

Kathleen Brooks, Director of Research at City Index, said: “Apparently it was a rogue algorithm that triggered the sell-off after it picked up comments made by the French President, Francois Hollande, who said if Theresa May and co want hard Brexit, they will get hard Brexit.”

A kneejerk reaction from an automated system to the desperate words of a European socialist who cannot live without Britain’s sponsorship.

For those with available capital, a fantastic opportunity which will never be repeated is now presenting itself.

A low pound means a very easy entry into the very best market on earth. Even with illiquid assets such as property, a purchase now in a good quality borough of London would mean a two dimensional increase – that of the appreciation of the property’s value, plus the inevitable rapid appreciation of the pound once the post-Brexit arrangements are in place – and no going back.

Europe’s economy will worsen without Britain, and Britain will flourish. The venture capitalists are not moving money to Berlin, Frankfurt or Paris, they are moving it to London. London is the powerhouse of the entire continent, and it is now independent. Indeed, some may argue that it has a separate economy to the rest of Britain.

Just 0.0009% of all of Europe’s workforce are employed in London’s financial sector, yet it produces 16% of all tax receipts for the whole of Europe. Now that’s what I call productivity.

Add ingenuity, modernity, the best infrastructure in the world, and the highest level of senior executive talent, and you have a formula which will mean massive increases for the pound and British stock in future.

As the world becomes even more London centric, and the entry point is now at an all time – albeit temporary – low, the time to invest is now.

+ Read This Next

Industry News, Institutional FX

Why are Tier 1 banks so afraid of direct FX counterparties? Bank of England gives first ever settlement account to non-bank firm

Today marks an absolute milestone in the method by which non-bank derivatives and settlement providers interact with the issuers of currency. Never mind the Tier 1 bank dealing desks, the central issuer of the world’s most valuable currency has just struck a direct deal with an FX provider. Ready for the future? This is what it could and should look like

Inside View, Opinion, Week in Review

Brexit: Democracy and a thriving electronic trading business among London’s finest, or a spanner in the works? Op Ed

The result of a referendum on European Union membership cannot be overturned. Or can it? What would happen within London’s financial sector if the execution of Article 50 is blocked and democratic process receives a poke in the eye? As the High Court continues to hear absurdities as to why it should not be invoked, we take a look at the potential consequences and the signs that the electorate and London’s business leaders are a true voice of reason.