Scottish independence: City set for market turbulence as Scots head to the polls
City traders will be at their desks earlier tomorrow morning in anticipation of an extremely busy day
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Your support makes all the difference.The City is bracing itself for unprecedented levels of trading in foreign-exchange markets and shares when the result of the Scottish referendum is announced early tomorrow.
With the pound set to be the major area of turbulence, traders rushed to hedge their bets on sterling ahead of the result.
Today the overnight sterling/dollar implied volatility rate (effectively a bet on how the pound could rise or fall against the greenback in one day) soared to 34.75 per cent, up from 12.75 per cent yesterday and almost 10 times its level one month ago. The pound itself was little changed.
Major banks in the City and Canary Wharf said that they would have more traders in and at an earlier time than usual tomorrow.
One senior banker said: “Our guys in New York will be hanging on later and our guys in London are not planning on much sleep. As usual, the book will be handed from the Far East to London and then on to New York, but everyone wants part of the action tomorrow.”
Trading could become busy almost as soon as voting ends at 10pm. The earliest regions to declare are likely to be the smaller ones which are expected to lean towards independence and put sterling under pressure, before the bigger regions with higher “No” turn outs finish counting.
Most of the UK’s biggest banks plan executive management meetings or conference calls as early as 6am.
The Bank of England is set to issue a statement almost immediately in the event of a “Yes” vote in a bid to reassure financial markets. UK clearing banks are expected to follow with messages for investors and customers.
All the High Street banks have been monitoring deposit flows by their retail and business customers in the run up to today’s vote. None was prepared to comment on the record but one source said there had been “no unusual flows in or out of our Scottish branches”.
Cash machines across Scotland are being stocked up with banknotes overnight to prevent any run on banks.
Bank of England Governor Mark Carney has left the G20 meeting in Australia and is due to land and head to the City tonight. Chancellor George Osborne cancelled his planned appearance at the G20.
The FTSE 100 rose a mere 30 points after three consecutive days of falls and trading volumes were some 30 per cent below normal levels with fewer than 200 million shares changing hands by lunchtime.
Banks and financial shares were among the risers as investor once again bet on a “No” vote. “Investors are discounting a “Yes” result now,” said Alastair McCaig, market analyst at IG.
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