Several major Europe-regulated forex brokers have announced they are hiking the margin requirements ahead of the upcoming snap general election in UK on June 8.
Major UK forex and CFD broker IG said it will increase the minimum margin from 1% (leverage of 1:100) to 2% (1:50). The change affects all GBP crosses and working orders, options, and positions opened via MetaTrader 4, starting from 8pm (UK time) on Thursday 8 June. IG says it will review the increased margin rates as soon as the election result is known, and expects them to return to normal shortly afterwards.
XM, a European forex broker regulated by UK’s FCA and the Cyprus Securities and Exchange Commission (CySEC) and ASIC, is hiking the margin requirement to 1% (1:100) for all GBP currency pairs and to 2% (1:50) for all CFDs on Equity Indices. The change comes in effect at 18:00 p.m. server time (GMT+3) on Thursday, 8th June 2017 and affects all positions (for opening new positions and for maintaining existing positions). According to XM, the measure is temporary and margin requirements will revert to normal (as per client account settings) by Friday 9th June 2017, shortly after the announcement of the results of the UK General Election.
Plus500 takes a bit more subversive approach in announcing the changes in margin requirements. In an e-mail to its clients, the forex and CFD broker encourages them to take advantage of the expected market volatility. In the small print at the bottom, however, Plus500 informs that it is doubling the margin requirements for all GBP and EUR forex pairs and the indices Europe 50, UK 100, France 40, Germany 30 and Germany MidCap., starting from June 7.
Ever cautious, the FCA-regulated forex and CFD broker ActivTrades, also announced it is hiking the margins on some instruments. Starting from June 8, one hour before market close, the broker will increase four-fold the margin requirements for the indices GER30, FRA40, UK100, ESP35, EURO50, GERTEC, ITA40, NETH25, SWI20. Starting from 10 p.m. CET on June 8, ActivTrades will double the margin requirements for the forex pairs EURGBP, GBPUSD, GBPAUD, GBPCAD, GBPCHF, GBPJPY, GBPNZD.
FxOpen, an ASIC and FCA-regulated forex and CFD broker, said it may increase five times the margin requirements for GBP pairs in the period June 7-9.
Earlier this week another European broker, Admiral Markets, already announced similar measures.
The main reason behind the brokers’ decisions is the expected high market volatility caused by the uncertainty surrounding the final result, as demonstrated by the latest public opinion polls in the UK. Some of them give a comfortable lead for the Tories ahead of the Labour party. At the same time, others predict a very narrow margin and even no majority for the Tories who until the weeks preceding the terrorist acts in Manchester and London had a comfortable lead. The latest poll of YouGov, published in June 6, for example, gives 304 seats for the Conservative party and 266 seats for the Labour party. In order to have a majority, a party needs at least 326 seats. Another survey – of Survation for Good Morning Britain – has put the Conservatives on 41 per cent and Labour on 40.
In comparison, when the snap election was called by Prime Minister Theresa May in April, the Tories were 24 points ahead of Jeremy Corbin’s party.
There is no need to point out the obvious fact that the outcome of the UK might affect the Brexit process and, subsequently, the global markets.