Vantage FX Caps Leverage in Run up to UK Brexit Vote

The broker attributed the changes to a "risk of wide spreads, price gaps and periods of thin liquidity"

More Brexit related news in the retail trading world this Wednesday as Vantage FX, an Australian broker, announced that it would be reducing leverage on three different instruments in the run-up to the next parliamentary vote regarding Britain’s plans to leave the European Union.

In an email sent to clients, the broker said that leverage on GBP/USD, GBP Crosses and UK100 would be halved. Leverage for all three of the instruments currently sits at 100:1 but will be reduced to 50:1.

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The restriction on leverage hasn’t been put in place just yet. Vantage FX said in its email to clients that the measures will be put in place at 09:00 am (Australian Eastern Standard Time) on January 14 – the day before the UK House of Commons votes on Theresa May’s latest Brexit deal.

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Vantage FX – not alone

Just as other brokers have justified changes to leverage when Brexit-related events appear on the horizon, Vantage FX cited concerns about significant changes to market conditions as the reason behind its decision to reduce leverage.

“Market conditions could be extremely volatile prior to and after the event. There is a risk of wide spreads, price gaps and periods of thin liquidity,” said the broker. “Vantage FX has conducted a review of our risk management policies with the intention of providing a more secure trading environment for our clients.”

Though it may mean they occasionally have to reduce leverage, the retail trading industry is one of the areas of the financial services industry least affected by Brexit. As with other politically tumultuous events, Brexit causes volatility in the market which, in turn, drives brokers’ volumes.

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