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Banks and foreign-exchange trading venues are drafting in extra staff to ensure financial markets cope with heavy volume and turbulence that is expected following Britain’s historic vote on its membership of the EU on Thursday.
Financial institutions have seconded sales, brokers, IT staff and traders in an effort to smooth any volatility and prevent trading systems buckling after a referendum that is likely to trigger heavy trading across currency, equity and bond markets.
Traders and brokers are particularly wary that UK polls close at 10pm local time on Thursday — when the trading day ends in New York and begins in the early hours in Asia.
Even though votes will be counted very early on Friday morning in London, banks will staff their London operations as the UK capital is the world’s main hub for currency trading.
“Clients who need to trade need colour to explain what’s happening,” said Steven Saywell, head of global strategy at BNP Paribas. He expects “quite a manning of trading floors” in the 24 hours after polling closes on Thursday.
Tradeweb, one of the largest electronic fixed income platforms, plans to open its venue from 4am London time on Friday morning for bonds and derivatives trading.
Sterling has been particularly sensitive to swings in opinion polls in recent weeks, and liquidity in the foreign exchange market will be a particular focus after it dried up in January 2015 when the Swiss central bank shocked traders by removing the franc’s longstanding peg to the euro. Markets gyrated and several currency brokers needed to be rescued as the industry nursed heavy losses.
French bank Société Générale has already warned customers it may not be able to provide usual levels of pricing and liquidity. “Your orders could be filled materially away from requested levels due to potential market dislocation,” it told clients in a note.
“Clients want to talk to people they know, and people in London are more expert in the nuances of the risk,” said a currency trader. “The event is much more impactful for the FX market.” He added that his bank was staffing desks “round the clock”, although it was counter-productive to have people working through the night and day.
Thomson Reuters and ICAP, which run two of the largest independent currency venues, said their platforms were built to deal with periods of elevated market stress and high volumes.
US-based CME Group, which runs one of the world’s largest forex listed derivatives markets, typically closes for an hour at 10pm in London. The exchange has no plans to change its normal trading hours, but it said it would be “actively monitoring” for market impacts and could alter price bands and fluctuation limits ahead of the vote.
IG Group, a retail trading venue, said it was focusing on protecting customers by monitoring trading margin requirements and having sufficient staff available. Many retail brokers have already asked customers to increase the amounts of margin — the insurance that traders must post to back their trades — on products related to UK equities and sterling, one of the world’s most actively-traded currencies.
The Bank of England is also expected to stand ready with liquidity to the market in the event of a shock. The Bank declined to comment.
UK’s EU referendum: full coverage and analysis
View the FT’s comprehensive guide to the vote on whether Britain should stay in Europe, with all the latest news, analysis and commentary from both sides of the debate. See more