Barclays stopped accepting new stop loss orders - a crucial part of currency trading - on Thursday as it and other banks acted to restrict possible losses and cap their exposure to the result of Britain’s EU mandate.Customers of the UK-based bank, who asked not to be called for factors of confidentiality, stated Barclays had informed consumers on Monday it would not execute such trades, where the bank seeks to close existing positions for clients at a pre-established rate, through its machine-trading algorithms.
It likewise declined all new stop-loss orders, whether over the phone or through messaging or dealing systems, as of 0600 GMT on Thursday, the customers said.Such action is very rare and a measure of the huge banks' concerns that a vote to leave the European Union would roil the marketplace as much as last year's unanticipated ditching by the Swiss National Bank of its cap on the franc versus the euro.
Bank of America Merrill Lynch and UBS have both provided communications to clients today, seen by Reuters, which warn of prospective spaces in the currency services they normally provide to major institutional customers.The relocations are aimed at limiting banks' and clients' exposure to losses if there are significant gaps where purchasers cannot be found for the pound or other major currencies consisting of the euro, as results of the UK vote drip in.
Arguments over whether banks could have accomplished better costs for stop loss orders were at the heart of legal conflicts between monetary companies over numerous millions of dollars of losses triggered by the franc s rise on Jan 15, 2015.
" Barclays have actually recommended on Monday that they weren't accepting stop loss orders via Barxalgo execution," a senior trader with one bank in London saw Reuters. "Further, they are declining any stop loss orders from 7am (London time today).".A second source verified the communication by Barclays.
The bank said it was taking actions to meet client’s needs, including providing additional personnel on referendum night." Our worldwide sales, trading and research study groups will be assisting clients navigate markets throughout the night and post the EU referendum choice ... as far as market conditions permit," it said.
A Barclays spokesperson decreased to comment further.Sterling increased 1.5 percent, breaking above $1.49 for the very first time since December as late surveys taken prior to the start of ballot on Thursday showed the "Remain" camp in front.The euro got almost 1 percent against the dollar and 2 percent versus the yen.
Swiss bank UBS, another of the big 6 lenders that dominate the $5 trillion a day currency market, cautioned customers previously today it might fail to carry out some orders on its electronic trading platform should the referendum impact liquidity or cause extreme volatility.A note to customers from Bank of America Merrill Lynch, the currency market's 5th biggest gamer, alerted of a number of service interruptions.
" BofAML's electronic trading platforms have volatility controls that might temporarily suspend execution and cost streaming in response to quick and unfavorable market movements," the interaction stated.Generally, big institutions expect banks to carry out big trades for them in the market within a few fractions of a cent of mid-market rates.
All this week's statements basically amount to a legal caution that clients can not anticipate regular service in the mandate's aftermath and might not get the offers they purchased - potentially adding up to millions in trading losses.One senior trader stated that of the banks he traded with had actually made it clear to customers that if sterling or the euro began to fall by numerous cents, they may be on their own.“(Banks) will be doing everything at their sole discretion in excellent faith," he said.