clamps down on foreign exchange trade before 'Brexit'
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[June 23, 2016]
By Patrick Graham
LONDON (Reuters) - Barclays stopped
accepting new "stop loss" orders, a standard element of trading on
currencies, as banks moved on Thursday to limit speculative market
moves and cap their exposure to the results of Britainís referendum
on EU membership.
Clients of the UK-based bank, who asked not to be named because the
information is confidential, said Barclays had told clients on
Monday it would not execute such trades, where the bank seeks to
close existing positions for clients at a pre-established price,
through its machine-trading algorithms.
Its refusal from 0600 GMT of all new stop-loss orders, whether over
the phone or through messaging or dealing systems, is extremely rare
and a measure of the big banks' concerns that a vote to leave the
European Union would spark similar chaos to that after last year's
blowout on the Swiss franc.
Bank of America Merrill Lynch and UBS have both issued
communications to clients this week, seen by Reuters, which warn of
potential gaps in the services they normally provide to major
The moves are aimed at limiting banks' and client exposure to losses
if there are substantial gaps where buyers cannot be found for the
pound or other major currencies including the euro, as results of
the UK vote trickle in.
Arguments over whether banks could have achieved better prices for
stop loss orders were at the heart of legal arguments between
financial firms over hundreds of millions of dollars in losses
caused by the francís surge in January of last year.
"Barclays have advised on Monday that they werenít accepting stop
loss orders via Barx algo execution," a senior trader with one bank
in London told Reuters. "Further they are not accepting any stop
loss orders from 7am (today)."
A second source confirmed the contents of the communications with
the bankís clients.
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The logo of Barclays is seen on the top of one of its branch in
Madrid, Spain in this March 22, 2016 file photo. REUTERS/Sergio
A Barclays spokesman declined to comment on the details of the communications
with clients but said the bank was taking steps to ensure it served clientsí
needs in trading around the referendum including providing extra staff on the
Swiss bank UBS, another of the big six lenders who dominate the $5 trillion a
day currency market, warned its clients earlier this week it may fail to execute
some orders on its electronic trading platform should the referendum affect
liquidity or cause extreme volatility.
"Other banks have advised this week that they will be doing everything at their
sole discretion in good faith," the first source said.
Sterling rose 1.5 percent in morning trade in Europe, breaking above $1.49 for
the first time since last December. The euro gained almost 1 percent against the
dollar and 2 percent against the yen.
(Editing by Nigel Stephenson)
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