TransferWise Caps Trades to 10,000 Pounds Before U.K. Brexit Vote
(Bloomberg) -- Currency retail brokerages are putting in place contingency plans for undue spikes in volatility surrounding the pound on Tuesday.
London-based TransferWise Ltd. is placing a 10,000 pound ($13,000) cap on transfers to and from the U.K. for a 24-hour period from 9 a.m. Tuesday ahead of the House of Commons’ vote on Prime Minister Theresa May’s deal to leave the European Union. That’s down from the usual 1 million pound limit. Switzerland-based Dukascopy Bank SA is reducing leverage to 30 times capital on pound trades until market volatility returns to acceptable levels.
“Because we lock in the real exchange rate at the time the customer sets up the transfer, extreme currency volatility can impact the service we’re able to offer,” said Magali Van Bulck, a spokeswoman for TransferWise, said in emailed comments. “For the 1 percent affected, we’d suggest they make their transfer later in the week, or set up multiple smaller payments.”
One-week volatility on the currency has surged, suggesting that traders are concerned that May’s deal may not pass, opening the way for a multitude of scenarios. Should Prime Minister May’s deal fail to get through the lower house, she has three days to come back with a Plan B, with either a general election, second referendum or a no-deal exit looking increasingly likely.
International payments company TTT Moneycorp Ltd. traded a month’s worth of volume in a day on the original Brexit referendum result and is bracing for a similar big reaction in the pound this time, a spokesperson said.
WorldFirst, FairFX Group Plc and Moneycorp are refraining from putting a cap on foreign-exchange transfers, but said they would be staffing the office late to field client queries and handle any potential turbulence in currency markets.
Revolut Ltd., a digital banking platform for foreign-exchange transfers, said there would be no change in margins on transactions, while Saxo Bank A/S said it had already increased margin requirements “quite significantly” on the pound before the vote was originally planned in December.
TransferWise said that it had put similar caps in place the last time May’s deal was due in parliament, before they were removed as May postponed the vote due to a lack of support.
The pound swung between gains and losses on Tuesday, trading down 0.2 percent at $1.2836 as of 11:08 a.m. in London, having touched a two-month high of $1.2930 on Monday.
“We are definitely preparing ourselves for a volatile day on Tuesday,” said a Moneycorp spokesperson. “Many of our customers, both corporate and private, have already hedged against potential movements.”
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