Major FX brokers have started hiking margins on all GBP and EUR trading pairs to mitigate any potentials risks stemming from the UK Referendum, which is scheduled to take place on June 23, 2016. Last week, New York-based Forex broker FXCM informed its clients of higher margin requirements on specific pairs, which may experience thin liquidity and abnormal volatility in the aftermath of the referendum. As FXCM stated in their communique, the new margin rules apply to USD, GBP, EUR, AUD, NZD, JPY, CAD, CHF and HKD denominated accounts. The new requirements went into effect last Friday.
FXCM also left the door open for additional margin hikes:
"In case market conditions become very volatile, we could raise margin requirements further."
Other brokers like Seychelles-based Tickmill also dropped leverage ratios for all traders on select pairs; 1:25 for all GBP pairs, down from 1:500; 1:100 for all EUR pairs, down from 1:500 previously; 1:20 for UK100 index, which traders can normally trade at a leverage of 1:100. Tickmill also told traders that under certain circumstance the opening of positions on certain pairs may be disabled altogether, "Depending on the market conditions, we may enforce close-only regime for certain currency pairs or indices. Large accounts that accumulate substantial market exposure may see their account leverage lowered further, subject to prior warning."
According to LeapRate, Cyprus-based FxPro has also instituted a similar "close only" rule. Earlier in the week, FxPro dramatically increased trading margins for GBP and EUR pairs, but in an email to customers this week the broker set trading margins back to normal levels, with higher requirements on orders bigger than 5 lots.
"Following increased demand from our clients we are increasing leverage for all FX pairs. To protect our clients against sharp market movements, we will be reviewing our trading conditions for the days leading up to the referendum, as well as during and in the aftermath of it."
While FX brokers are increasing margin requirements to protect themselves and their clients in the event UK voters want out of the EU, British-based gambling firm Ladbrokes puts the odds of Britain leaving the EU at 29%, 14% lower than last week's reading.
And it would seem that the market also seems to believe that Britain will remain in the EU - the GBP/USD opened with a 110-pip gap today and is currently trading 140 pips higher than where it opened.
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