The EU referendum vote is turning out to be the biggest trading event of 2016.
The decision to Leave the EU has created unprecedented volatility, with the pound hitting 31-year lows of 1.3230.
Don’t miss out on the opportunities in GBP/USD, the UK100, UK Shares and Gold.
With increased market volatility comes increased risk, please continue to exercise caution while trading.
Welcome to our EU Referendum Service Updates Page
We anticipate extremely high levels of volatility and trading volumes over the coming days as Britain goes to the polls for the EU referendum. Please refer to this page for platform and service updates from City Index over the EU referendum period.
Tuesday 28th June: 17:30 BST
We are pleased to announce that margin requirements have now reverted back to their pre-referendum levels. Our FX spreads have also reverted back to fixed spreads from the temporary shift to variable spreads.
Monday 27th June: 13:30 BST
Please note that we have reverted back to our normal fixed spreads on the selected markets that were affected earlier. These changes were a result of extreme underlying market volatility due to the EU referendum.
There still may be further changes to spreads, including reverting to variable spreads, if market conditions call for it.
Friday 24th June: 08:00 BST
Due to exceptionally high underlying market volatility as a result of the EU referendum, our FX market spreads will be variable until further notice. Please also be aware that during these volatile periods spreads may be considerably wider than normal across a number of markets.
Friday 24th June: 04:39 BST
It looks all over bar the shouting as Leave now holds a 52% to 48% lead, the BBC are calling it as a final result. Gold has soared by $75 to $1325. GBPUSD is just holding above the 1.3500 level and indices are close to the night’s lows, the UK100 sits just above 5,900, the Germany 30 market trades just under 9,600. The British people have spoken and shocked the World’s markets with their decision to leave the European Union. Expect volatility to remain high over the coming days and through the market open again on Sunday night and continue to tread with caution.
Friday 24th June: 03:53 BST
Leave now leading by over 460,000 votes and are looking like they might be successful in forcing a Brexit. The markets are in full-blown panic with the pound falling to 2009 lows versus the dollar of 1.3645. The UK100 is also tumbling, and is now down nearly 10% from the evening highs, trading currently at 5845. The Germany 30 index is now trading down nearly 900pts at 9620, as traders seem to have been caught massively on the wrong foot with the expected outcome of the referendum.
Friday 24th June: 03:03 BST
This really is too close to call – Currently there’s just 13,820 votes of a lead for Leave with 118/382 declared.
Friday 24th June: 02:44 BST
As Remain claw back the lead thanks to London, GBPUSD bounces back strongly and is now nearly 500pips off the lows of 1.4013. The UK100 is also bouncing back and trades nearly 200pts higher than its 5954 lows.
Friday 24th June: 00:21 BST
Sunderland result – Votes counted – 134,400. Remain – 51930, Leave – 82,394. GBPUSD dives to 1.4300. Current standings – Remain – 50.7%, Leave – 49.3% following the Sunderland result.
Thursday 23rd June: 23:59 BST
BBC on Newcastle count: result worse for Remain than polls had shown, Sunderland also possibly weaker. #GBPUSD slides back below 1.4900 to 1.4882.
Thursday 23rd June: 23:39 BST
First results are in from Gibraltar. Remain – 96% Leave 4%, not unexpected but big turnout at 84%.
Thursday 23rd June: 22:10pm
The polls are now shut and we await the first results, expected around 02:00 BST. Sky TV have just said the latest YouGov poll has remain at 52% and leave at 48%. Markets are surging on the back of the predicted win for Remain, GBP/USD hits 1.5.
Thursday 23rd June: 14:30pm
The latest polls are still too close to call, but momentum now seems to be with the Remain camp. Markets remain nervous and we anticipate high volatility over the coming days regardless of the outcome. We’ll be posting on this page regularly with any important updates relating to our products and services, please check back here for the latest information.
What is the EU Referendum?
The EU Referendum is a public vote to be held on June 23rd 2016 that will decide whether the United Kingdom remains in, or leaves the European Union, a scenario being referred to as ‘Brexit’. It is widely regarded as one of the biggest events facing the financial markets in 2016.
The possibility of a ‘Brexit’ is the result of a promise made by Prime Minister David Cameron in 2013 to hold a referendum on whether Britain should remain in the European Union, should the Conservative party prevail in the 2015 General Election.
The 15th of May marked the official start of the ‘Remain’/‘Leave’ campaigns, and as the deadline draws nearer, the debates will rage and volatility could start to increase. Early polls show that the British public are evenly split on the issue, with perhaps a slight bias towards ‘Remain’.
Whatever the outcome, there is a strong possibility of significant market reaction in the lead up to and after the vote outcome on June 24th. What is less certain is if this volatility will continue in the long term, should ‘Brexit’ become a reality.
As the deadline looms, traders all over the world will be making preparations for an exciting and volatile few weeks.
What actions are City Index taking to protect clients around the vote?
Important notice: City Index are making a number of changes to help protect clients against adverse moves and position closures around the EU referendum vote.
Changes to our margin requirements.
Our margin requirements will change temporarily to reflect the increased market uncertainty around the EU referendum. From 19/06/2016 these changes will include:
⚫ GBP related currency pairs and UK Indices will move to 3% base rate margin as a minimum.
⚫ EUR related currency pairs and European and US Indices will move to 1% base rate margin as a minimum.
⚫ On affected markets, the margin required will change according to the size of your position.
⚫ For a full list of changes please visit this page.
⚫ Margin rates may be subject to further changes at short notice.
⚫ The base margin rate is as per the first margin tier set out in the below table.
⚫ Please note that in the event the size of your position exceeds the threshold (the “up to” amount) set out below, your full position may be charged a higher margin rate, in line with the above table.
'Remain'? The Arguments
Both sides maintain compelling and well researched arguments, with political parties and business leaders voicing their opinions for one side or the other. Some of the arguments put forward from the 'Remain' camp include:
EU Membership gives Britain more political clout on the world stage. Also, Britain can still reject certain EU policies, such as the euro as its currency.
Being part of the EU provides Britain’s military with more strategic allies and allows the UK to work more closely with other members to keep its borders safe.
45% of Britain’s exports go to the EU, and, as an EU member - Britain can obtain better terms on them.
Free trade allows UK businesses easier access to European markets and talent pools.
There is no hard evidence that immigrants take jobs away from UK natives, and some studies show that immigrants contribute to the overall UK economy.
Millions of UK jobs are directly linked to the EU, and would be put at risk.
EU membership costs each household £340 a year, but brings in an estimated £3,000.
'Leave'? The Arguments
Both sides maintain compelling and well researched arguments, with political parties and business leaders voicing their opinions for one side or the other. Some of the arguments put forward from the 'Leave' camp include:
Leaving will allow Britain more control of domestic policy, for example; setting its own laws around employment and health & safety.
Tighter border control will increase domestic security by restricting cross border crime and terrorism.
An exit would give Britain greater power to negotiate more favourable, bilateral trade agreements, on its own terms.
The EU bureaucracy is a hindrance for UK businesses, particularly smaller ones.
An end to the current EU ‘open door policy’ will allow Britain to be more selective about the types of migrants the UK accepts.
The British labour market would be enhanced by more improved trade agreements and more selective migration.
Were Britain to leave the EU it would not have to contribute billions a year to the EU budget.
Using stops to manage your risk around the Referendum
Here are the main things to bear in mind when planning your trades around the Referendum.
Use Stop Loss Orders
At City Index, we offer a range of tools to help you manage your trading risks. These include Stop Loss Orders, Trailing Stops and Guaranteed Stop Loss Orders (GSLOs).
Stop Loss Orders can be used to close a losing trade once a market passes a specific level, set by you, to cut your losses if the market moves against you. Regular stop losses will not protect you though if a market 'gaps' in times of high volatility.
Trailing Stops help you to minimise potential losses, without setting a limit on your potential gains. A Trailing Stop is created by setting a Stop Order that ‘trails’ your position by a specific number of points. If the trade moves in your favour, the Trailing Stop moves with the market, executing only when the market turns and trades through the trailing stop.
Use Guaranteed Stop Losses
As the volatility increases in the lead up to and around the vote, there is a possibility that markets might jump, or ‘gap’, possibly by significant amounts. It is also a possibility that as the market digests the outcome over the weekend after the vote that there will be further volatility when the markets open again on Sunday the 26th.
‘Gapping’ occurs during times of high volatility and low liquidity. In such instances, your order is filled at the next, best available price, even if you have a stop loss attached to the trade.
However, Guaranteed Stop Loss Orders can be used as protection against slippage. GSLOs ensure that the Order will be executed at the exact level that you specify, regardless of whether the market gaps. This incurs a small premium, which can be thought of as insurance against gapping. Please note, GSLOs are only available on certain markets.
Consider more conservative position sizing and less leverage
Another way to minimise your risk is to reduce stake sizes or reduce the number of open positions you have. The more positions you have open, the higher the chance that a sharp move can take you close or over your margin close-out level.
For every trade, a proper position size should be decided according to the size of your trading account. True, a $1,000 trading account requires different position sizes than a £100,000 trading account, but, with any account size, it can help you to avoid losses if your positions are prudently and proportionally sized.
One of the main risks presented by the Referendum is the likelihood of unpredictable market moves in the lead up to, and after the referendum vote.
There is a heightened chance of markets gapping one way or the other and traders need to be prepared for the possible fallout of such volatility - prudent risk management is more important than ever.
5 tips to managing your account around the EU Referendum vote
With the "Brexit" vote on the UK's membership in the European Union just around the corner on June 23, markets are likely to grow more volatile and erratic in the near term. Below, we highlight five actionable tips to help you prepare for this key event risk.
Expect volatile market conditions
As we near the vote, markets will likely become more nervous, potentially leading to unpredictable reversals and counter-trend moves that don't occur as often in more normal market conditions. If you have a long term trading method, you may find that it isn’t as successful in these unusual market conditions. Maintain discipline and avoid emotional trades to increase your chances of success.
Reduce your leverage
Consider decreasing your standard trading leverage on FX markets. That way, if you're caught on the wrong side of an unexpected move, you're more likely to avoid a margin call or a liquidation. Alternatively, you may want to add more funds to your trading account to increase your margin of safety. There will undoubtedly be plenty of chances to take advantage of the Brexit-referendum volatility, but risk management should always remain the top priority.
Understand the impact of market gapping and illiquidity
In addition to the expected increase in market volatility, liquidity may also fall to below-normal levels. This can widen the bid-ask spreads in some markets and increase the likelihood of trading gaps. As a result, market and stop orders may not execute at the desired price, potentially leading to worse-than-expected fills on trade orders. Consider the implications of low-liquidity markets before placing any trades.
Decrease your trading time horizons
You may also want to shorten your standard trading time horizon as the referendum nears. Specifically, the risks of holding a position overnight and over the weekend, when relevant news continues to emerge but markets are halted, will rise. By shifting down to a shorter-term or intraday strategy you can sidestep the risk of an adverse news announcement hitting while you’re away from your trading platform.
Consider taking a break
If you don’t have a strong opinion on the Brexit vote, perhaps the best way to "manage" risk would be to take a brief trading hiatus the week of the referendum, or at least focus on trading instruments that should be uncorrelated with the decision. By not trading whatsoever that week you can eliminate the risk of a Brexit-related trading loss altogether.
By keeping these 5 actionable tips in mind, you can be better prepared to navigate the risks and opportunities posed by the upcoming Brexit referendum, regardless of the eventual outcome.