How will FX brokers avoid Brexit black swan volatility? – Part 3, FXPRIMUS

Just over two weeks is all that remains before the citizens of the United Kingdom cast their votes as to whether the nation in which they reside should remain a member state of the European Union, or whether it should go it alone as an independent sovereign nation. No referendum was held when Britain agreed […]

How will FX brokers avoid Brexit black swan volatility?

Just over two weeks is all that remains before the citizens of the United Kingdom cast their votes as to whether the nation in which they reside should remain a member state of the European Union, or whether it should go it alone as an independent sovereign nation.

No referendum was held when Britain agreed to an accession treaty on 22 January 1972 together with the EEC (European Economic Community) states, Denmark, and Ireland, or when the European Communities Act 1972 went through the legislative process. Britain joined the European Economic Community on 1 January 1973, along with Denmark and Ireland.

Throughout the 1980s and 1990s, discussions had been held on allowing a referendum to take place, however here we are 44 years after Britain joined what was then the EEC, with votes about to be cast.

Today’s economic and commercial landscape is considerably different to that of 44 years ago. Britain is a financial powerhouse, home to the largest interbank FX trading center in the world by a considerable margin – just 6 banks, all located in Canary Wharf in East London, account for over 46% of all global interbank FX order flow, and the City of London is an ultra-modern, highly technologically advanced financial powerhouse, hosting the majority of the institutional FX companies and prime of prime brokerages which power the non-bank electronic trading industry for the entire world.

Britain’s pound is the most highly valued currency in the world by a considerable margin, and has been for many years.

Such an important mainstay of the European economy, Britain is a shining light of ingenuity and financial prowess, therefore, the potential outcome of the referendum on what has been dubbed ‘Brexit’ from the European Union is a matter for all brokerages and traders to concentrate on.

Indeed, a potential exit from the European Union could be the cause of high volatility in the FX market, as such an important country goes it alone, just as remaining in the European Union may lead to volatility as the European sovereign debt would still present a burden to the British Chancellor of the Exchequer’s balance sheet.

In 2015, the Swiss National Bank removed the 1.20 peg on the EURCHF pair, sending the currency markets into a sudden period of unprecedented volatilty, exposing brokerages to negative client balances and in some cases causing their insolvency.

The British pound has never been pegged to the Euro, however a similarly volatile situation could occur in the days following the result of the referendum.

FXPRIMUS maintains responsibility to clients, increases margin on Sterling pairs by 2%

FXPRIMUS Head of Dealing Ioannis Gerousis today explained to FinanceFeeds: “Business will continue as usual for trading on the Sterling pairs, except that the company has decided to increase the required margin on Sterling pairs to a minimum of 2%, in order to help manage risk during this particularly volatile period. We are monitoring the polls on continuous basis, and our experts remain vigilant to pickup any development that might occur. ”

Indeed, it is clear that the increase in margin requirements by brokerages wishing to safeguard themselves and their clients against any extreme volatility is a common direction against those with prudent risk management controls in place.

Read this next

Digital Assets

Sumsub and Mercuryo publish a guide for VASPs: “Mastering Travel Rule Compliance”

“At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Digital Assets

Bitget Wallet Leads with Record Swap Volume & New Crypto Innovations

This week, Bitget Wallet achieved a milestone by surpassing Metamask with a record 388,757 Swap order transactions, securing the global lead. The significant 7-day trading volume, almost 68,000 more than its rival, underscores its liquidity and user trust. This robust activity signals Bitget Wallet’s prominent role and reliability in the dynamic crypto market.

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

Digital Assets

BlockDAG Presale Raises $9.9M as Batch 5 Nears Sell-Out Amid Bonk’s Fluctuating Trading Volume & Spell’s Bullish Price

Explore BONK’s trading volume, SPELL’s market shifts, and why BlockDAG’s 10,000 ROI makes it an ideal crypto for savvy investors in 2024.

Digital Assets

Bybit expands into Europe amid regulatory scrutiny

Dubai-based cryptocurrency exchange Bybit is expanding its operations in Europe after encountering regulatory challenges in Hong Kong.

Digital Assets

Cathie Wood’s sponsored Bitcoin ETF sees historic $200 million inflows

The ARK 21Shares Bitcoin ETF (ARKB), co-sponsored by Cathie Wood’s ARK Invest, registered historic inflows exceeding $200 million on Wednesday, signaling a robust appetite among investors for Bitcoin-centric investments.

<