@MarketWatch: Interactive Brokers Weathers Brexit Well
To be honest, I was getting a little tired of hearing about Brexit, the referendum last Thursday in the UK to decide if the country should leave the European Union. As the week wore on, it seemed the vote was inevitably going to be “Remain”. So all the hoopla surrounding the lead-up to it by media seemed like media “make work”.
While doing the reporting for some other stories I wrote that week and prior I came in contact with Interactive Brokers, the broker-dealer and proprietary trading firm. I had decided to do a story on them alone and scheduled, then rescheduled, a call with them for Thursday afternoon about 4pm.
They, like everyone else, were expecting a “Remain” vote but, given their customers trade a lot of options on major indices and options and foreign exchange futures and options, they had a contingency plan for a vote that would go otherwise.
Not everyone did.
Some retail investors couldn't access their @TDAmeritrade, @Fidelity accounts on Friday https://t.co/EPlF634mIj
— Dave Michaels (@davidamichaels) June 25, 2016
When I saw, as I was monitoring Twitter late Thursday night, that “Go” would prevail, I came into work on Friday morning with a different idea for a story.
How one broker weathered the Brexit storm
Published: June 24, 2016 12:40 p.m. ET
By Francine McKenna
They knew it was coming. Broker-dealer Interactive Brokers Group Inc. IBKR, has been planning for the Brexit vote since February, but, until late Thursday afternoon, the firm thought, like almost everyone else, the U.K. would vote to remain in the European Union.
Polls earlier in the week had showed support for the “stay” camp growing, even as Federal Reserve Chairwoman Janet Yellen had cautioned on Tuesday that the U.K. leaving the European Union posed a risk.
Fortunately, for the sake of the firm and its customers, Interactive Brokers was also ready for the “unexpected scenario,” according to Steve Sanders, its executive vice president for marketing and product development.
As Thursday night wore on in London, vote tallies started coming in from all corners of what’s left of the British Empire. According to Interactive Broker chief operating officer John Chait, who is based in Switzerland and spoke with MarketWatch on Friday morning, the market had been indicating that a “remain” vote was the likely outcome. Independence Party leader Nigel Farage had all but conceded after the polls closed, with the latest polling showing a 52%-to-48% lead for the “remain” camp. However, the Sunderland vote returns were a bellwether that the tide had turned. Just after midnight London time as the market indicated a sharp change in voter choice. “The volume spiked and there were dramatic price moves in the British pound — sterling collapsed,” said Chait.
The possibility of the U.K. exiting the E.U. had suddenly become the reality. Volatility in currencies, in particular the British pound, were the most dramatic. The pound fell at one point by as much as 11% to $1.3229, its lowest level since 1985. Chait said that compared to the January 15, 2015, Swiss franc crisis, when that country de-linked its currency from the euro, market volumes were extraordinarily high but not so chaotic. “It’s critical that your broker can keep up with these events,” Chait said. “We were ready for the higher volume, and it was a nonevent for us.”