I don’t think there is anyone out there who
doesn’t think the FX market performed well under the stress of the surprise
outcome from the UK referendum last week, but I suspect the real test is only
The Bank of England (BoE) is expecting that
some “monetary policy easing will likely be required over the summer” as the
“economic outlook has deteriorated” on the back of the UK voting to leave the
EU, the BoE governor Mark ...
With the dust having
settled somewhat following the UK’s historical referendum decision to leave the
European Union, there are some clear winners and – unfortunately – some losers
emerging in the aftermath.
It should be noted
that this list is by ...
thirds of small businesses in the UK are exposed to currency risks following
the Brexit vote, according to East & Partners, a banking market research
and analysis firm.
The firms’ research
shows that in the first half of 2016 all “...
The depreciation of
sterling since the Brexit vote could increase pressure on UK corporate ratings,
with UK retailers and airlines particularly exposed, says ratings agency,
Although Fitch says
that the falling value of the pound is unlikely to spur ...
In a surprise move the Bank of England’s Monetary Policy
Committee overwhelmingly voted to maintain bank rates at 0.5% Thursday,
although it said it expects to take some stimulus measures in August.
At its meeting ending July 13, the MPC voted ...
A senior member of the Commodity Futures Trading Commission (CFTC) has called for a “thorough and unbiased analysis” by global financial regulators of the systemic risk of “unprecedented capital constraining regulations on global financial and risk-transfer markets”.
In a statement issued today, CFTC commissioner Christopher Giancarlo repeats his warning over liquidity risk in financial markets, noting, “The increased risk is in part due to untested bank capital constraints imposed by US and overseas bank regulators under the Dodd-Frank Act and similar laws.”
Thomson Reuters says its sterling volumes trebled on October 7, the day of the Cable flash crash which saw the pair drop from above 1.25 to below 1.15 before recovering to 1.24.
The company does not break down its volume data by product or currency on a daily basis and provides no further details, however this would appear to be further evidence of the phenomenon in FX markets whereby dealers typically head to the major matching venues of EBS Market and Thomson Reuters Matching when markets get hectic.
On October 7, Cable flash crashed in early Asian trading, leading to chaos in the market and an official investigation into events surrounding the move. Colin Lambert takes a look at what happened.
A few minutes into October 7 UK time, at 12.07.03am to where there are grounds to believe that the transaction is be precise, Cable traded through 1.2600 having fallen 30 points in the previous minute. Just 23 seconds later it traded below 1.2200 and 45 seconds later it had traded at 1.1378 on one platform.
Just two minutes later the market was trading back above 1.2100 and just 10 minutes after the initial move, Cable was trading above 1.2400. The market had “flash crashed”.
Sterling jumped almost 100 pips today after the British High Court ruled that the UK parliament must vote on Brexit before it is formally triggered by Article 50.
The government is expected to appeal the court’s decision, but in the meantime, sterling rose from 1.2335 at 10am UK time to peak at 1.2494 by 1:15pm, its strongest since the October 7 flash crash.
The other big news in the UK today was that the Bank of England’s Monetary Policy Committee (MPC) voted unanimously to maintain Bank Rate at 0.25%.
In a move that might be seen as a little late, the National Futures Association (NFA) has instructed FX brokers to raise their margin requirements for clients trading sterling.
Under NFA rules the 10 most traded currencies have be subject to a 2% margin on the notional value of outstanding contracts, while currencies outside of that group have had a 5% requirement.
Noting that its rules allow the NFA to change margin requirements “under extraordinary market conditions”, the regulator says, “Given the recent events involving the UK exiting the European Union (Brexit) the executive committee has determined to increase the minimum security deposits required to be collected and maintained by FDMs [forex dealer members] under Section 12 for currency pairs involving the British pound to a minimum of 5%. This increase is effective as of 5 p.m. (CST) on November 7, 2016 and remains in effect until further notice.”