Coping with Brexit – How Did Forex Brokers Fare?

Yael Warman

Last Thursday’s UK referendum on EU membership led to the most significant political and economic event in the UK – and by implication Europe and the wider world – for decades. In an entirely unexpected result, UK voters opted to leave the EU by a margin of 52% to 48%. With polls closing on Thursday […]

London, Canary Wharf from Thames

Last Thursday’s UK referendum on EU membership led to the most significant political and economic event in the UK – and by implication Europe and the wider world – for decades. In an entirely unexpected result, UK voters opted to leave the EU by a margin of 52% to 48%.

With polls closing on Thursday evening at 10:00pm, Betfair’s initial reaction at that time was to predict an 87% chance of a victory for the Remain camp, a percentage similar to that of other bookmakers, and one that seemed more and more outrageous as the results were announced throughout the evening.

Friday’s trading saw the pound reach 30-year lows against the dollar, at one point trading below 1.34, before recovering slightly later in the day to finish above 1.36. This morning’s early trading has seen the sterling drop again to around 1.34, with analysts predicting that the sterling has further losses to endure over the next few weeks.

Warning investors not to assume that the bounce in the sterling was long term, Ric Deverell, Research Analyst at Credit Suisse, explains: “While we acknowledge the risk of a technical bounce back, we think the repricing in many markets has further to run. The dollar rally is forecast to continue, with the GBP to USD conversion moving into the 1.20s.”

With a Remain result being increasingly factored in to the value of the sterling in the lead up to the referendum, and the exchange rate almost reaching 1.50 at poll closing time on Thursday, forex traders were left dealing with a massive fall in the value of the sterling. As we reported last week, forex traders were taking the decision across the board to limit leverage, with many reducing leverages in sterling-based transfers in the lead up to the vote itself.

CFI Markets announced that they would be extending limited margin requirements at least until today, saying: “We would like to hereby inform you that CFI Markets will keep margins as is currently at least until Monday… Additionally, and although we will try to keep spreads as low as possible, these risk to be higher (sic) than in ordinary times.”

Other companies chose to limit margins even further, predicting that markets were likely to be hit by sustained uncertainty throughout this week. One such company was Hantec Markets, who issued a statement saying: “Hantec had earlier limited margin to 25:1 (pre vote), and will now limit leverage further to 10:1 on all spot FX, spot CFD, spot Oil an spot Bullion positions.”

On the whole, companies had prepared satisfactorily for the result, even if it was unexpected. IG’s statement was as follows: “The Company managed its operations and exposure very effectively through the night and into today (Friday).”

There were however several companies whose trading sites crashed during the night, leaving traders and customers very unhappy. Xe.com, one of the UK’s most popular currency trading apps, crashed early Friday morning, with the company saying that “It had been pounded by record-breaking levels of traffic prompted by the unprecedented event.”

.

Read this next

Inside View

Crypto Liquidity Providers: No Transaction, No Party!

One of the most integral parts of trading cryptocurrencies is ensuring seamless transactions; however, this is not always easy when you first start using cryptocurrency exchanges.

Digital Assets

Niftables launches white label NFT platform for content creators and brands

Niftables is the go-to platform for brands and creators looking to realize their NFT vision — whether they’re an individual or the biggest entertainment company in the world.

Retail FX

ACY Securities sponsors Table Tennis NSW as CFD broker bets in Australia’s youngest

ACY Securities has partnered with Table Tennis New South Wales (TTNSW) for a two-year sponsorship agreement intended to highlight the Chatswood-based multi-asset CFD broker’s brand in Australia, with a focus on the southeastern state.

Executive Moves

Peter Hetherington appointed CEO of Capital.com, Currency.com, and Shares.com

With his extensive experience driving strategy and growth for leading wealth and brokerage firms in highly regulated markets, Peter is the ideal CEO to lead the Group on its next chapter of growth and success.”

Digital Assets

Crypto platform Elwood raises $70m from Goldman Sachs, Dawn, Barclays, BlockFi, Flow, Galaxy, more

Elwood Technologies has closed a $70 million Series A funding round co-led by Europe’s largest B2B investor Dawn Capital and global investment bank, Goldman Sachs.

Industry News

Wilshire to launch Climate Change 1.5℃ Target Index with Nikkei and Hang Seng

Wilshire has announced a collective launch with Nikkei and Hang Seng to bring to market the first in a series of indexes empowering investors to transition their investments towards a low-carbon and climate resilient economy.

Industry News

Anne Boden’s Starling Bank bets big on UEFA Women’s EURO 2022 tournament

Starling Bank has launched a campaign ahead of the UEFA Women’s EURO 2022 tournament as part of its national sponsorship, the biggest ever for the bank.

Industry News

Older adults flock to financial apps as Revolut reports 215% more UK users aged 55-74 since pandemic

Data has also shown that older adults are back to travelling as the 55-64 UK age group has seen a tenfold increase in the amount spent in foreign countries over the past two years, and the 64-75 age group isn’t far behind with an 840% increase.

Industry News

Ripple replies to SEC’s last attempt and “shoves it down their throats pretty hard”

“The SEC really messed that up. How can Hinman receive legal advice from SEC lawyers for a personal opinion?”, attorney Hogan commented.

<