Pound Traders Glued to Desks as Brexit Vote Meets Witching Hour

Currency traders are taking no chances as the U.K. Parliament’s Brexit vote late Tuesday will come during thin liquidity heading into the market’s witching hour.

Money managers are canceling evening plans to stay at the office to ensure they don’t miss market swings like those seen during sterling’s 2016 flash crash or the chaos that followed the Swiss National Bank unexpectedly dropping its currency floor in 2015. The pound could move as much as 6 percent in either direction depending on the vote’s outcome, strategists say.

“That’s one of the SNB lessons learned, there were a lot of less experienced people on the desk,” said Alan Schwarz, New Jersey-based CEO of FXSpotStream LLC, a trading venue launched by banks. “I will guarantee you a lot of the most senior people at the banks will be at their desk or will be able to get to it.”

With the memory of the 2016 plunge in the pound provoked by thin liquidity in Asian hours still on their minds, traders will be hoping the vote doesn’t come too late. The result is due around 8:30 p.m. U.K. time, but a delay could see it pushed between the end of the New York close and the start of trading in Tokyo.

A relatively small shortfall in the votes Prime Minister Theresa May needs to pass her deal could actually spur gains in the currency on the prospect of talks for a second attempt, according to strategists. A large loss ignites risks including a no-confidence vote, a push for a second referendum or an election, which would drive sterling lower. Options betting on one-week volatility are holding near an 18-month high.