Banks on High Alert over volatile markets

Banks on High Alert over volatile markets

Banks and brokers are being put under scrutiny by the Financial Conduct Authority (FCA). This is in anticipation of the market reaction to the results of the EU referendum.

Traders have been put on notice regarding potential conduct risks, such as giving certain customers preferential treatment as orders come in in what is anticipated to be a highly volatile market.

Extra restrictions and risk limits have been imposed by Banks for traders in asset classes they operate within. Staff have also been warned that their conversations are being closely monitored.

London markets have seen dramatic swings in the week leading up to Thursdays vote since the 2008 Financial Crisis. The pound went from near lows for 2016 against the US dollar to highs for the year on Thursday.

Some Bankers have been liaising with the FCA, and have been detailing how they will expand their capacity to deal with volumes potentially up to 10 times the regular trading.

The FCA have been asking firms over the past two weeks about their contingency plans for market volatility and how they would be affected.

Firms will be positioning to hedge or make profits from the volatility, but the FCA is hoping they will ensure their behaviour in the markets is orderly.

However, the FCA are concerned that large movements in the markets could prompt misconduct. One area of concern is of ‘tired and wired’ traders forced to work long hours over the course of the referendum.

Over the next few weeks, the results of the Brexit vote will be considered throughout the financial world.

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