Clearing houses raise margin calls on Brexit

UK decision to leave the EU is seeing Asian clearers demanding higher margins on some contracts.

Clearing houses in Asia have increased the amount of margin traders must pledge for certain derivatives contracts in the wake of Britain’s vote to leave the EU.

In a circular published on Friday, the Australian Securities Exchange (ASX) said it was raising margins on ASX SPI200 futures contracts by almost 40%. It also increased margin rates for 10 year government bond 6% coupon futures by 20%, in response to “the results of the Brexit referendum.”

Meanwhile, the Singapore Exchange (SGX) raised margins on Nikkei futures due to heightened volatility.

“We are definitely seeing more margin calls in the intra-day space for most clients,” said one head of OTC clearing at a European bank.

“The short-end of the curve is being most affected, and the market is readying at the 10-year point [for GBP swaps], with trading down over 10 basis points. We are expecting more volatility throughout the week.”

According to data from Clarus Financial Technology, 10 year GBP swaps have traded 16 basis points lower on Monday morning, with gilt futures trading rising significantly.

On Friday over 2 million sterling gilt futures were traded on ICE Futures Europe.

CME Group also said in a circular that it has extended the period of price fluctuation limits for FX futures and interest rate futures, “in connection with the Brexit vote.”

The notice extends the price fluctuation limit to the close of trading on Monday 27 June.