Retail brokers have continued taking a cautionary approach ahead of next week’s Brexit vote that could potentially unleash waves of volatility across foreign exchange and the financial markets. The latest provider exercising such contingency measures was Swiss forex bank and brokerage firm Dukascopy, which will see a change in their margin schedules.
Starting from today at 18:00 GMT, and extending until further notice, Dukascopy will increase margins on all GBP crosses and the UK stock index. Specifically, the broker reduced its maximum leverage to 1:30 for GBR.IDX/GBP, BRENT.CMD/USD, LIGHT.CMD/USD and GBP related FX instruments. Preferring to exercise on the safe side rather than incur any woes, the reduced leverage applies to all trading accounts without exception.
British lawmakers are set to vote on Prime Minister Theresa May’s Brexit deal on Tuesday, January 15 with only two months left before the UK is set to leave the European Union.
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As such, retail brokers and online venues such as Admiral Markets and Vantage FX are demanding higher cash balances from their clients for transacting in sterling and UK shares ahead of setting out the terms of the EU divorce.
Brokers are looking to protect themselves and their customers from any potential sharp market shifts that have the potential to wipe out account balances before trades can be cut. Beside raising leverage, many of them also make other amendments to their trading conditions, such as increasing stop out levels or restricting positions on certain instruments.
Geneva-based FX firm also left the door open to additional changes as needed, pending any unforeseen outcomes, but it estimates to return to normal conditions on Wednesday, January 16.
Many retail brokers still remember the brunt of the franc’s black swan in 2015. Interactive Brokers, IG, LCG and CMC all suffered losses, while Alpari UK went bankrupt and FXCM had to get a rescue from Jefferies parent Leucadia.