How the Brexit Has Affected the Forex Industry So Far

Phew! It looks like forex brokers can breathe easy now that the EU referendum has come and gone. The Brexit decision did wreak some havoc across the charts but industry players are looking unshaken so far.

In fact, institutional forex platforms such as FastMatch, Hotspot FX, and Thomson Reuters reported thrice as much as the normal trading volume on Friday despite the sharps tosses and turns for pound pairs. Spot FX volumes on Thomson Reuters jumped to $258 billion the day after the EU referendum, compared to the daily average of $94 billion recorded in May.

Meanwhile, retail forex broker Plus500 reported a sudden surge in account signups on Friday, as 1,600 new trading clients opened accounts then. As a result, the broker enjoyed record highs in spread revenue with trading volumes above normal levels. Forex platform and technology provider Leverate also saw trading activity nearly triple, adding that its clients were able to survive the Brexit vote unscathed. Saxo Bank reported record trading gains for its clients to the tune of €200 million while also executing a record amount of orders on its trading platform.

Now that things seem to be returning to normal, in terms of price action and trading volumes at least, some brokers have started easing their margin requirements to pre-Brexit conditions.

For instance, Geneva-based broker Dukascopy said that it is already removing leverage restrictions put in place during the previous week but is still maintaining position limits on certain GBP and EUR indices. CFI Markets is also returning margin requirements to normal levels but cautioned that another spike in volatility could lead them to impose restrictions again. The broker also noted that spreads on GBP pairs may continue to be higher than usual.

Other brokers are still choosing to play it safe for now. Vantage FX is keeping elevated margin levels in place until further notice but has removed its “Close Only” trading status for several GBP and EUR pairs.

Moving forward, Brexit-related developments could still impact forex firms, particularly those regulated in the UK or the EU. According to a statement issued by the UK Financial Conduct Authority, much financial regulation applied to UK firms is derived from EU legislation so those should remain in place unless there are any changes made by government officials.

Do you think the UK’s decision to leave the EU would have a material impact on forex industry players, particularly those in the UK? Don’t be shy to share your thoughts in our comments section below!

  • Blaise Kinyua

    Hi @Espipionage,

    I am new to forex and currently reading on the fundamentals and recent history of this industry. I have read about the SNB saga and how matters changed for all stake holders because of that decision.
    With that in mind you recently did a post on what brokers had done pre-brexit to protect temselves. Kindly explain to me like you would a child what the preconditions were and how they help:
    – Margin requirements
    – Close-only mode
    – Leverage restrictions
    – and any other I may have missed and would be helpful in my arsenal of forex knowledge.

    Thanks.