CLS FX Volumes Spike After UK General Election
In this report we examine the impact of the UK general election on the foreign exchange spot market, using data published by CLS on Quandl. We do this by comparing GBPUSD hourly volumes on 09 June 2017, the first business day following the election, to the corresponding 2016 average GBPUSD hourly volumes.
The exit poll at 22:00 produced a surprise outcome with the Conservative party expected to win just 314 seats, far less than previous polls and 12 seats short of an overall majority. This resulted in an elevated trading activity in GBPUSD at 22:00. As results were being announced during the night, the unexpected exit poll was becoming more credible and GBPUSD volumes remained much higher than the 2016 average.
By 6:00, there were only two seats remaining to be counted (Richmond and Kensington) and thus the second peak in GBPUSD trading activity at 08:00 probably reflected the wider market reaction as the European session commenced. The third spike at 12:00 is perhaps due to the news headline that Theresa May is going to form a government with the Democratic Unionist Party – Northern Ireland (DUP).
The data in this report is based on trades submitted to the CLS settlement and aggregation services. The data is adjusted to equate to the same reporting convention used by the Bank for International Settlements (BIS) and the semi-annual foreign exchange committee market reports. These surveys only report one side of any trade, and only the far leg of FX swap trades, to avoid double counting the total amount of trades.
In determining the time of submission, only matched trades are included and we use the earlier of the two submission times as the trade time proxy. We receive confirmation on the majority of trades from settlement members within 2 minutes of trade execution. We determine the instrument type using an algorithm.
The data here is restricted to 32 currency pairs which meet the volume requirements of the algorithm with the exception of HUF/USD which was included to provide visibility into the HUF which was added in November 2015. The detailed volume data underlying this review is made available on Quandl, an on-line marketplace for financial and economic data.
Carney said EU firms would face capital charges as much as ten times higher than today.
Brexit-related events have had a significant impact on the FX market.
Systemically important CCPs may have to be located in the EU.
Introducing a more pan-European approach to the supervision of CCPs.
Euro derivatives clearing may be forced to relocate to the EU from London.