On June 23rd voters in the UK will make a historic decision on whether or not to remain in the European Union. The financial markets in the UK have been moving based solely on the latest polling numbers of the Brexit vote. The most recent YouGov poll shows a 45% chance of a UK exit from the EU. This is an increase over polls from just a week ago. Currency analyst believes that an exit from the Euro could lead to a 20% drop in the value of the British Pound.
Forex Brokers have been preparing for the vote by lowering leverage amounts and increasing the margin requirements on GBP pairs. Saxo Bank, CMC, and FXCM have all announced changes as a result of the upcoming vote. Many of these will be instituted days before the event. Depending on how the polls look in the next couple of weeks there will likely be more brokers preparing for the storm.
One thing that sets this apart from the “Black Swan” event of January 2015 is that we have known about the referendum vote for months now. When the Swiss National Bank made their decision to remove the peg to the Euro there was absolutely no warning on their part. Banks and Brokers were taken completely by surprise. In a matter of seconds, the fortunes of many Retail Forex Brokers would change forever.
With the Brexit vote Banks and Brokers have had plenty of time to prepare for the various scenarios. In the end, this will most likely not have anywhere near the impact of the Black Swan event. If the UK votes in favor of leaving the EU the future of Forex Brokers in the UK could be in question. The UK will then no longer be part of the European Union when it comes to regulatory jurisdiction. Many banks have already indicated that they would move from London to Ireland or other European cities. In the meantime, the world waits for the vote that could change the face of Europe indefinitely.
Trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary.