The City is braced for an “unprecedented” trading volumes this Friday, as investors react to the outcome of tomorrow’s Referendum.
It is thought that the likely result will be known early Friday morning, ahead of the markets opening in London.
A number of leading stock brokers and financial advisers have already increased staffing levels to ensure they can cope with the anticipated demand from investors.
Hargreaves Lansdown said it will be tripling dealing staff, as well as hiring additional helpdesk personal to deal with queries from concerned investors. It will also extend its opening hours on Friday.
Investment platform AJ Bell said it had already seen twice the volume of normal activity this week, as investors look to position their portfolio ahead of the vote on Thursday.
Russ Mould, the investment director at AJ Bell said he expect this volume to increase dramatically on Friday – particularly if the vote is for a Brexit, which would be likely to cause more disruption on markets.
Investors May Face Dealing Problems
He predicted that trading volumes were likely to exceed those seen when the Royal Mail (RMG) floated on the stock exchange – which brought a number of stock brokers to their knees – causing delays and chaos for many private investors.
“There is no doubt that the referendum vote on Thursday is going to cause a spike in trading volumes either way but a Brexit vote could cause an unprecedented dealing day on Friday. Our systems are tested regularly to ensure they can handle a spike in volumes but it is not just stockbroker services where blockages can occur. Market makers could buckle under the load, which will cause delays for everyone, and trading could even be suspended if the market goes into freefall.
These concerns were echoed by leading stockbroker Charles Stanley (CAY). Magnus Wheatley, its managing director said he expects "considerable volumes" to be traded on Friday and far more market volatility than usual.
"It is possible that market-makers will reduce the size of orders that can be placed online and be slow to answer phones," he said.
Further Stockmarket Volatility Ahead
Markets have been volatile recently is week – with strong gains in the FTSE 100 at the start of this week, after polls showed the “Remain” campaign has gained ground on the rival “Leave” campaign.
The Prime Minister, David Cameron, has told this Financial Times that he predicts there will be a “remain dividend” with an investment surge into the UK if the country votes to stay in the EU.
There have also been stark warnings that gains seen to date could be swiftly reversed in the outcome of the referendum is for the UK to leave the EU. Investment bank UBS (UBS) has warned today that more than £350 billion could be wiped off the FTSE 100 in such a scenario.
It isn’t just the stock market that is braced for record trading levels and high volatility. The referendum is also likely to have a major impact on currency and bond markets – as well as stock markets in Europe and the US.
However, AJ Bell warned private investors not to over-react to sudden market movements. Mould said: “Retail investors should be very careful about trying to time the market. Market volatility driven by sentiment rather than company fundamentals is normally short-term and people should not panic or get over excited.
“In the end it is profit and growth that drives company valuations over the long term and people should not lose sight of that when making decisions about their portfolios.”
