Do not invest more money than you can afford to lose.
Against the background of the growing tensions around the upcoming EU referendum in the UK on June 23, SMN asked Plamen Peychev, chief dealer of the EU-regulated forex broker Trading 212, to tell us what measures the company has taken in preparation for the vote and to share his opinion on the effects of an eventual Brexit on the British and the EU economy.
What other measures, besides hiking the margin requirements, have you taken in regard to UK’s EU referendum on June 23?
We offer instruments, such as the FTSE 100 index, with both fixed and floating spreads – spot and futures, respectively. We are limiting the number of lots that can be ordered for those with a fixed spread. The size order of those with a floating spread will remain unchanged. So those traders who want to place larger orders, will have to trade on a floating spread. Clients who already have open positions on a fixed spread, will not be affected in any way and can close them whenever they like. They shouldn’t worry about the risk of high market volatility. Bit we will not allow the opening of large orders on a tight spread. If someone wants to open a small position on, say FTSE 100, can do so on a fixed spread, but the spreads on large positions will be defined by the market volatility.
What do you expect to happen on the day of the vote?
I expect price fluctuations and market volatility. There will probably be some speculations and rumors, for example a rumor that the Brexit vote will prevail. This will bring the prices of the GBP and the indices down. Or, if it is rumored that the “Remain” vote gains ground, will happen the opposite. Such things are possible. So from this point of view I wouldn’t recommend to our clients to open very large positions and take big risks. They’d rather wait a bit, because it wouldn’t be very reasonable to trade in such high market volatility and on wide spreads.
What do you expect to happen in the immediate aftermath of a “Leave” vote?
It would be negative for the UK economy as a whole. I expect that the UK indices will drop, as well as the GBP. The EUR will also lose its value because in general this would be a very bad signal for the entire European economy. Next thing we know, another country might decide to also leave the EU.
If the UK voters choose to remain in the EU, the prices of the GBP, the indices and the EUR will rise.
In the long run, if UK chooses Brexit, the British companies will have much smaller profits, there will be lower salaries or a slower increase of salaries and in practice the average UK citizen will be worse off. I think that if the Brits are smart, they will vote to remain in the EU.
Trading 212 is owned by the Bulgarian-based company Avus Capital. It is regulated by UK’s Financial Conduct Authority, the Cyprus Securities and Exchange Commission and Bulgaria’s Financial Supervision Commission. It provides trading of forex and contracts for difference (CFDs) on forex, gold, oil and stocks in more than 65 countries, including Germany, Russia, and China.