The LONGEST day
Central banks to flood market with cash in case of Brexit Hedge funds plot to make a killing Traders to work through the night as City prepares for . . .
CITY traders are braced for their most turbulent night since the financial crisis as Britain heads to the polls for the European Union referendum.
Finance giants including Barclays and Royal Bank of Scotland are drafting in round-the-clock teams to buy and sell as the result of the vote becomes clear.
It is rumoured hedge funds have commissioned secret exit polls to get a feel for the national mood, and central banks are preparing to pump billions into the economy to keep markets afloat if the system seizes up.
Analysts have warned of wild swings in share prices and currencies depending on the result – affecting the investments and pensions of millions of savers as well as the cost of holiday money.
One top executive compared the atmosphere to New Year’s Eve 1999, as Britain fretted that a potential Millennium bug could bring technology to a standstill.
‘This is a bit like that. Everybody’s worried about it and has really prepared for it,’ the banking source said. ‘We’re prepared, we’ve been prepared for a while. Our traders are going to be in throughout the night.’
There have been wild swings in the pound as the markets try to second-guess the result. Sterling plummeted early last week as a series of polls put the Leave camp ahead.
The cost of insuring against swings in the pound hit levels not seen since 2008 and traders wiped £98bn off the blue-chip FTSE 100 index in four days.
On Monday the currency recorded its biggest one- day jump in eight years as traders bet on a Remain vote and the Footsie saw its biggest gain in four months. This confusion is set to continue until the result is known – meaning there are fortunes to be made or lost.
While the stock market will close as usual at 4.30pm today – protecting most institutional investors such as pension funds from overnight chaos – trading in currency and complex products such as derivatives will not stop. Traders are now gearing up for their busiest night in years after polls close. Barclays, Lloyds Banking Group and US giants such as JP Morgan Chase and Citi are among those calling in senior staff. A number of banks are said to be booking hotel rooms and laying on food overnight for their teams.
Some firms are even believed to be offering small bonuses to staff drafted in.
And many are taking automatic trading systems offline in case they struggle to cope.
Barclays is understood to be planning to fully staff its foreign exchange and commodities teams.
NatWest owner RBS is also manning trading desks for 24 hours with teams in London, Singapore and Stamford in the US.
Even Lloyds – which is more focused on retail banking – will have some employees in overnight to deal with clients.
Grandees are planning to follow the results of the referendum live, with City of London Corporation chairman Mark Boleat saying it will have ‘an all-night session’.
Meanwhile, hedge fund bosses are hoping to earn huge profits by correctly guessing the vote’s outcome. No official exit poll is expected tonight as the referendum is a oneoff political event and voting behaviour is much harder to predict.
Several hedge funds are rumoured to have commissioned private exit polls. They will keep this information secret and use it to bet on the price of sterling or pick up shares at rock-bottom prices.
Speaking to Bloomberg, David Neuhauser of hedge fund Livermore Partners said: ‘You want times when people are afraid to invest so you can put money to work.’
Investment bank UBS has warned clients to expect extreme swings and a surge in activity regardless of the result, meaning some electronic trades on its platform could fail.
Even after the result is known, markets could take time to settle down. Chancellor George Osborne has refused to rule out a suspension of trading on the stock market if there is a Brexit.