FxPro, Saxo Bank warn of Brexit market volatility, latter hikes margin requirements

FxPro, Saxo Bank warn of Brexit market volatility, latter hikes margin requirements

Do not invest more money than you can afford to lose.


The approaching UK vote on the country’s remaining in the EU and the unclear outcome of the referendum are increasingly causing concern among the leading global forex brokers who started warning their clients to be cautious of the potential market volatility. Besides warning its clients, the Danish forex broker Saxo Bank said it is hiking the margin requirements on some assets.

On Tuesday the online forex broker FxPro noted in its blog that the Brexit debate is already causing significant market volatility, with sharp currency movements, particularly of the GBP. “As June 23 nears and uncertainty escalates, the volatility affecting GBP pairs in particular, and the currency market in general, heightens,” the broker said. For this reason, FxPro urged its clients to make sure they have enough margin and free equity, as spreads may widen considerably and there may be a rise in margin requirements. The broker also cautioned the traders to anticipate not only the referendum results, but also the market reactions and to read daily market analysis and the latest on market movements.

Saxo Bank, another leading global forex broker, also warned its clients of the potential risks of the Brexit vote – heightened market movements, including possibilities of significant price gaps and periods of illiquidity. The broker recommended strongly to its clients that they are prepared and positioned properly as the referendum date approaches. “We encourage you not to overleverage yourself and to exercise care, diligence and discipline in your investment and trading,” Saxo Bank said and added it will watch closely the market volatility, concentration and liquidity.

The broker also said it is increasing the margin requirements for all UK Index contracts-for-difference (CFDs) that are GBP-denominated. In addition, the Danish broker is also eying an increase in European Index CFDs (EUR), UK single stock CFDs (CHF), UK stock options (JPY), and UK cash stocks (XAU). The changes are effective as of June 16.

“Going into an event of this magnitude with less than a 5-7 percent margin requirement on any U.K. margin instrument does not seem responsible to us and gives the retail client the wrong impression of the underlying volatility and risk,” Claus Nielsen, head of Saxo’s markets unit, told Bloomberg.

“We will do our best to inform you of any upcoming changes, but please be aware of margin requirements leading up to the referendum and ensure that your account has sufficient collateral to meet margin requirements at all times,” Saxo Bank said. The broker added that the Brexit vote could results in heightened gap risk and could put the clients’ accounts on margin call, so they should properly manage their margin collateral.

Nevertheless, Saxo Bank assured that all measures will be temporary and said it expects to return to normal operation depending on the market conditions after the UK referendum.

The warning comes after recently the Cyprus regulator Cyprus Securities and Exchange Commission (CySEC) asked the  Cyprus Investment Firms (CIFs) to monitor the Brexit-related risks.

And while FxPro only warns of eventually increasing margin requirements, the forex broker JustForex said it will increase margin requirements by 2.5 times for currency pairs with the GBP.

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