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Futures exchange CME Group has taken “emergency action” as the UK casts votes in its historic EU referendum.
In a notice late Wednesday, Chicago-based CME said it had raised special price fluctuation limits in currency futures and benchmark interest rate futures, writes Gregory Meyer in New York.
Fluctuation limits serve as circuit breakers in futures markets, temporarily locking trading after extreme price moves. Limits for dollar-sterling futures normally range from 400 ticks to 1,600 ticks, in escalating progression.
The emergency action, in place to Friday, will double limits for currency contracts, bringing the range for the pound from 800 ticks to 3,200 ticks.
“The exchanges determined that there is a strong likelihood that the ‘Brexit’ vote may result in increased price volatility in CME FX and CME and CBOT Interest Rate futures products,” CME said in a notice to traders. “The emergency action is being taken as a precautionary measure and is intended to ensure fair and orderly trading in all these products”.
As CME was taking emergency action, it was also using the Brexit vote as a marketing opportunity. In an email blast sent out early Thursday London time, the exchange operator touted its contracts.
“As markets remain uncertain and volatility builds, trade British pound futures and options on the largest regulated FX market in the world and mitigate your currency risk,” the email said.
Early Thursday in Chicago, CME’s September pound-dollar futures were up 0.9 per cent, while September euro-pound futures were down 0.3 per cent.
Separately, Intercontinental Exchange’s London-based futures exchange said it was amending “reasonability limits” for sterling and gilt, Euribor and Libor interest rate futures on Friday.
“These changes are in light of potential increased volatility as a result of the EU Referendum to be held in the UK on Thursday 23 June 2016,” ICE said in a circular.