Dear Valued Client,

On our previous mailing, we indicated some of the potential risks associated with the BREXIT REFERENDUM. If you missed this or would like to revisit it, you can do so here: http://us9.campaign-archive1.com/?u=b5dc2459e99d68da4a2653c33&id=48a8e4d3d6

As a reminder, effective June 10, 2016 at 20:00 GMT, we increased the margin requirement on all CFDs. UK100 will have 10% margin requirement, DE30 will have 4%, and other CFDs will double to 2%.

 

FX AND SPOT METAL PAIRS

As mentioned earlier, the vast majority of our Liquidity Providers are increasing their margin requirements across the board for FX and metals for the Brexit, and we will be following their lead.

Effective June 17, 2016 at 20:00 GMT, the maximum leverage on ALL accounts for ALL FX pairs and metals will be reduced to 50:1.

Leading up to the vote/results, we expect liquidity to be sporadically thin, and markets incredibly volatile which may result in highly frenetic market conditions.
 
The extent of the market response to the referendum remains largely unknown and speculation on both the lead up to, and the aftermath, ranges from moderate to severe among market analysts. Some of the risks inherent with an event of this magnitude may include, (but are not limited to) huge whipsaw moves and spikes, significantly widened spreads, deterioration of technicals, LP disconnects and price pulling, stop losses and take profits being largely slipped due to reduced liquidity, and an increased probability of gap risk.
 
In other words, if you are looking for a good time to take a break or summer vacation from trading, the upcoming week is a great time!
 
For those of you considering looking for opportunities to profit from the erratic price action, we strongly urge you to consider the impact of these risks (especially the risk of significantly widened spreads) and to consider staying out of the markets. At this point we have no way of knowing how dramatic the response will be, but we strongly encourage a “safety first” approach to these potential conditions – especially to those you with the added responsibility of managing investor capital. Further to this, please remember MT.Cook’s DMA pricing model which quotes the real, raw market and is not pre-packaged, internalized, or filtered pricing.

 

REVERTING BACK TO ORIGINAL LEVERAGE

Our goal is to get the margin on all instruments back to current levels soon after the Brexit decision is made known, but it will of course depend on the result and what may ensue in the aftermath. We anticipate that our cap on leverage will last form June 17th to June 27th at the latest, unless conditions warrant otherwise. We will notify you shortly after the referendum as to when the leverage will be set back to previous levels.

In preparation for the reduced leverage, you may need to lessen your risk/exposure, or close off open positions and/or add funds to your trading account.

More than anything, we want our clients to enter this event with eyes wide open and simply expect the unexpected. This does not mean that these conditions are guaranteed to occur, but we strongly advise erring on the side of caution.

Thank for your time, and please take this as another reminder to be wise and safe with your trading plans this month.

If you have any questions or concerns about any of these updates or your Client Agreement in general, please do not hesitate to contact us at any time.

Sincerely,
Mt.Cook Financial