As the polls closed on the UK’s EU referendum, the market was heavily positioned for a Remain victory. As news came in the result had gone the other way, traders scrambled to reverse their positions, triggering heightened volumes and volatility. On a day – and especially a night – of frenetic trading on the currency markets, retail traders largely sat on the sidelines, according to brokers and liquidity providers.
Chris Vecchio, currency strategist at DailyFX, says: “Retail definitely saw a decline in volume, with open interest on GBP/USD 40% below its 12-month average, and that is why there were no problems with liquidity. The Bank of England’s (BoE) £250 billion backstop was also a release.”
Lower-than-average participation among retail was observed by other brokers, too, but was more than offset by heightened volumes among ECNs and banks. This meant overall volumes were elevated, particularly from around 11pm on June 23 in the UK, when the first signs started to emerge that confidence in a Remain vote had been misplaced and traders scrambled to reverse their exposures.
To read the full article in Euromoney, please click here