Traders brace for Brexit bonanza
Proposal for training to enhance factory skills
MARKETS in London are bracing for what could be a wild ride in everything from foreign-exchange to stock trading as Britin votes on European Union membership.
Voting booths closed at 10pm GMT yesterday, and the City’s traders could face anything from a market maelstrom to a whimper as results trickle in during the early morning hours of today. Bank of America Corp expects a 10 per cent downward jolt in equities if the country votes to leave the EU. Billionaire investor George Soros warned that the pound, the bellwether trade for Brexit watchers, could plunge more than 20 per cent should voters back leaving.
ICAP operates vital Treasuryand currency-trading venues and will have extra staff on hand. Bats Global Markets, which runs the biggest panEuropean stock market, has tested its systems to withstand volumes that are multiples beyond what it has experienced. Euronext and Tradeweb Markets are also taking extra measures, while banks have warned clients that some services may be limited.
“Everyone is certainly beefing up their staffing around the time of the results and the hours that follow,” said Michael O’Brien, director of global trading at Boston-based mutual-fund company Eaton Vance, who plans to stay on his company’s trading floor until the results are known. “Banks are all doing it, I suspect most asset managers are doing it, and we’re no different.”
Recent market gains signal a “Leave” vote would be a surprise result for traders, even with polls suggesting the outcome is too close to call. That could test the region’s systems for buying and selling financial assets.
Retail currency broker FXCM lost more than $200 million after the Swiss central bank let the franc trade freely against the euro in January 2015, triggering one of the biggest market upheavals in recent history. Some Wall Street banks sought to renege on trades with clients after the event. FXCM said in a notice to its customers that it is raising margin requirements on some currencies, including the pound and the euro, this week.
Electronic-trading platform ParFX says the currency venue will have extra trading and IT staff available if needed, and has been in regular contact with customers in the run- up to the vote. Lessons have been learned since last year’s Swiss franc shock, according to ParFX chief executive officer Dan Marcus.
“Market participants are now better prepared for an explosion of volatility and are likely to err on the side of caution in the face of significantly higher trading activity following the EU referendum vote,” he said.
Tradeweb, which facilitates trading in European government bonds, Treasuries, interest-rate swaps, among other asset classes, said it would open early, at 4am in London, to accommodate a possible surge in early morning volume.
London’s stock markets are designed to automatically pause after excessive price swings. Bats says equities on its European platform are subject to price collars, which reject orders that stray too far from previous reference prices. The thresholds range from about 5 per cent to 10 per cent.
Euronext, which operates markets in Paris and Amsterdam, also has circuit breakers. To cope with heav y trading this week, it has widened price limits for derivatives and may relieve market makers of some obligations.
The London Stock Exchange, which plans to open as usual today, has its own thresholds ranging from about 3 per cent to 10 per cent or more. If orders exceed that range, the stock automatically goes into an auction before resuming trading. The venue has accounted for about 62 per cent of public UK trading this month, compared with 24 per cent for Bats.
Some key trading platforms are run by banks, which also play a vital role in making markets. Bank of America reminded customers on Monday that extreme volatility might delay trades and that it is not obligated to accept orders, according to a client notice seen by Bloomberg News. Societe Generale has also cautioned clients currency liquidity and pricing could be constrained. CAMBODIA has appealed to Germany – a country renowned for its skilled technicians and engineers – to provide vocational training to support the Kingdom’s growing industrial sector, a Commerce Ministry official said yesterday.
In a meeting earlier this week, Minister of Commerce Pan Sorasak urged German Ambassador Joachim Baron von Marshall to consider establishing a vocational training program to improve the skills of local factory workers.
He said Cambodia’s goal is to attract light industry manufacturers, and this type of investment creates a demand for skilled labour.
As an example, the minister said Cambodia has grown to become the world’s secondlargest exporter of bicycles. To support the industry, the country needs skilled workers such as welders, parts assemblers and machinery operators.
“In order to promote Cambodian industry, workers need to have skills,” said Pao Hengdara, the ministry’s chief of cabinet. “The minister wants to urge more German investors to come, and for Germany to provide vocational training to promote our industrial sector.”
According to Hengdara, the German ambassador said he would seek the approval of his government to initiate vocational training programs.
Adelbert Eberhardt, country director GIZ Cambodia, said t he Ger ma n development agency had so far only provided vocational training for small projects. However, he said the training could prove benef ic i a l to Ca mbod ia’s industrial growth.
“It’s a good idea,” he sa id, “but first we need to set up a [ bi later a l ] ag reement a nd study which field is the priorit y for training.”
A GIZ consultant will meet with the Cambodian government in October to discuss the proposal, he added.