IG Group hikes GBP forex pairs margins over “flash crash”

IG Group hikes GBP forex pairs margins over “flash crash”


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IG Group announced it is increasing the margin on all GBP currency pairs to 1%, starting from 8pm (UK) time on Friday, October 7.

The reason, given by the broker in the email to its clients, is the “heightened volatility in foreign exchange markets”.

This means that if clients have any non-limited-risk positions on affected markets at 8pm on Friday 7 October, they will need to have enough money in their account to cover the increased margin requirements and prevent their positions from being closed out.

Margin requirements for working orders will also be subject to the new rates. Changes to margin rates are the same for cash and futures CFDs. Changes changes also apply to positions opened via MT4.

The “flash crash” happened shortly after midnight London time on October 7, when within minutes the GBP crashed  6.1% to $1.1819 against the USD in a matter of minutes, reaching a historical 31-year low. Minutes later the pound recovered somewhat, rising to $1.24 on the intraday market.

What caused the “flash crash”, which is a relatively rare occurrence, is not entirely clear, but there are several more or less feasible explanations.

Some market experts said that the Cable’s flash crash is caused by a fat-finger speculation with trading robots involved, others suggested the Sterling’s free fall was due to poor liquidity, however other currencies did not experience similar moves. Another group supposed it’s due to the “hard Brexit” overemphasis and even blamed French President François Hollande, who said that U.K. will have to “pay the price” yesterday, commenting on the matter.

There were even opinions suggesting that Deutsche Bank, which is facing a $14 billion fine by US authorities, is involved in Pound Flash Crash. According to the bank, the GBP fall has been “shocking”, and it will only get worse.

Meanwhile, a spokesman of the Bank of England said that it is “looking into” the causes of the Sterling’s crash, however, we will probably never know for sure who or what has triggered it. One thing, though, is certain: more volatility is expected in the future from Brexit uncertainties and forthcoming US elections, and maybe on a broader scale.

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