Preparing for the Referendum and Possible Market Move
Financial Spreads, the UK spread betting and CFD company, is expecting heavy trading volumes once the results of the EU referendum start being announced.
According to Adam Jepsen, the founder of Financial Spreads, they have taken a number of steps to prepare for the increased trading volumes. However, heavy trading may not start until 01:00-02:00 on Friday 24 June.
- "Our first step was to write to clients and warn them of the potentially extreme volatility.
We could see unprecedented levels of volatility. If so, that could increase the downside risk for investors and therefore make it more difficult for them to trade profitably.
- We have also increased our server capacity ahead of the referendum. As with any normal business day we expect 95-99% of trades to go through the website and mobile apps.
- We will have the whole Dealing Support team in the office overnight on Thursday to help take calls/trades.
Having said that, it might be a quiet start to the evening for the team and so they could end up sitting around and twiddling their thumbs.
The voting ends at 22:00 Thursday 23 June and so it may not be until 01:00-02:00 when there is a clearer indication of the result.
Therefore we may not see a big increase in trading until 01:00-02:00.
- As normal we are running more than 20 forex markets overnight including GBP/USD, EUR/GBP and EUR/USD.
- Margins (the funds that clients need to deposit before they can trade) are increasing at 18:00 today, Wednesday 22 June.
Clients will need to deposit 8-10 times as much as normal to trade.
This is to help clients retain higher capital buffers on their accounts and so hopefully fewer trades will be closed because a volatile market has temporarily moved against a client's positions.
Likewise, we hope this will also means fewer margin calls for clients, i.e. fewer requests for clients to deposit more money to cover their trades during the volatile conditions.
- - - - Expected Trading Volumes - - - -
- Trading volumes are currently light, particularly in sterling based markets like GBP/USD and EUR/GBP. I hope this is because clients are aware of the potential risks and/or they have heeded our warnings.
- As above, heavy trading may only start around 01:00-02:00, Friday 24 June.
- We expect these high trading volumes to continue throughout Friday 24 June until we close at 22:00.
- During the weekend, the media will naturally dissect the results. Politicians will have their two pennies worth.
This could certainly give renewed impetus to the markets. We expect brisk trading to resume when we re-open at 22:00 on Sunday 26 June.
- On Monday 27 June, volumes should remain heavy and hopefully the volatile aftershocks will get smaller. We plan to return to normal margins at 17:00, Monday 27 June.
- - - - All Hands on Deck - - - -
It is all hands on deck and I plan to do two things:
- Help with Customer Support, which is probably a safer place for me. I don't think anyone would want me taking trades over the phone and causing confusion with a fat finger error.
- Annoy the IT, Operations and the Dealing Support teams by constantly asking for updates."
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.
By Adam Jepsen, 22 June 2016
