2016 — Bringing on Brexit.
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And so, we reach the year of the UK referendum…
Ahead of the Brexit vote, many brokers were still reeling from the SNB Black Swan event the previous year, so they began tailoring their trading conditions before the vote. Brokers hoisted up their margin requirements on GBP, EUR and UK indices, limiting the size of open positions and lowering leverage in preparation for currency chaos.
On June 23, the UK awoke to brilliant sunshine and the startling decision to leave the EU. Total chaos ensued across Europe, the likes of which hadn’t been seen since the financial crisis. Markets around the world crashed and investors flocked towards safe-haven assets like Gold, which saw price increases of more than 5%!
Directly after the results, the Sterling lost a mighty 8% of its value, heralding the biggest fall in a single day for a major currency since the Second World War! The effects rippled into other markets, with the FTSE100 taking a nose-dive of more than 500 points at opening, and banking stocks losing more than 30% of their market value.
Following the vote, regulators across the world began to tighten their belts. On August 1, the AMF declared the enforcement of a ban on all forms of marketing communications advertising highly speculative and risky financial contracts including binary options, CFDs and other forex products.
More EU countries then showed their hand, with Belgium announcing on August 13, that legislation will be passed to ban all leveraged OTC derivatives including CFDs, rolling spot forex contracts and binary options.
Cyprus then made its move, as CySEC announced a ban on all bonuses, stating that brokers “must avoid the practice of offering bonuses that are designed to incentivise retail clients to trade in complex speculative products such as CFDs, binary options and rolling spot forex”. CySEC then went that little bit further and lowered the default leverage to 1:50 in response to the SNB Black Swan one year earlier… The FCA then followed suit!
As global regulators tightened their belts, how did the vast regulatory changes shape the economic climate? You’ll have to wait for tomorrow’s instalment to find out!
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