Direct Speech, EU – Baltic States, Financial Services, Investments, Latvia, Legislation

On 23 June, a referendum will take place in Great Britain regarding the issue of further membership of the country in the European Union.  

This event will significantly impact financial markets and may result in growth of volatility, including considerable price gaps and periods of absence or low liquidity.

We recommend participants of financial markets to adjust their positions and be especially careful during this period, avoiding the use of high leverage. 

In view of the expected heightened financial volatility, there is a high probability of increasing margin requirements and, as a consequence, the occurrence of margin calls. Therefore, we recommend you to take care of having sufficient funds in advance, as there is a possibility of limitations introduced for some transactions or types of orders.

Low liquidity can result in considerable gapping when executing stop orders.

To hedge risks during the period of market uncertainty, one can use options (put options for protecting long positions and calls for protecting short positions). 

Right before this event and immediately following it, Rietumu Bank will thoroughly follow the volatility on the market. Planned changes of margin requirements will be published a week prior to the referendum.

Experts of Rietumu Asset Management (RAM) have also evaluated the market impact, depending on the referendum results.