Market Overview

IG Group Hikes Margins In Preparation For Italian Referendum

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IG Group is a global leader in online trading. It is the United Kingdom’s number one provider in the UK leverage trading industry.

On December 4, 2016, Italy will be faced with a referendum that will decide whether the country will make amendments to its constitution. In preparation for this referendum, IG Group announced margin hikes that will go into effect beginning at 3 PM (UK time), December 2, 2016. This will affect working orders, options and positions opened via MetaTrader4 (MT4) trading platform. Positions opened with guaranteed stops will not be affected by the margin change.

IG Group is the parent company of Nadex. However, since Nadex has no margin requirements, this hike in margins will not affect trading on the Nadex platform.

The Italian referendum has the capacity to cause volatility in trading. The trader needs to be aware of this and trade accordingly.

Depending on the outcome of the vote, the Prime Minister of Italy has vowed to resign if the reforms are rejected. Rejection of the reforms would also find the euro weakened against the dollar.

According to an article found on Express, “The European Central Bank Vice President, Vitor Constancio, has warned: "It's the sort of political uncertainty that will trigger or not an economic shock in financial markets.”
He added that the ECB would react depending on the "degree of uncertainty.”
It is this type of uncertainty that causes volatility in the markets. Traders may wonder if this is similar to Brexit. In the same article on Express, Dr. Steven McCabe, an economist at Birmingham City University’s Business School said, “that an Italexit would cause profound shockwaves politically and economically”.
“Similar to the decision of the UK to leave the EU, this would cause shockwaves and, it is feared, embolden voters in the other major members of the EU, Germany and France to do similarly,” he explained.
“In effect this would be the end of the ‘United States of Europe’ dream and undo all of the economic and political cooperation that has been achieved since the Second World War.”
It is hard to know how the voting on the referendum will play out, but it will undoubtedly bring some amount of volatility to the market. If you have open positions that may be affected, be sure they are safeguarded by checking on them often and making sure margin requirements have been met.
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