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Screenshot of a breaking news alert e-mail from Q2 2017
Will the UK leave the EU?
Traders placing bets on the IG Group binary market created for the Brexit vote seem to say ‘No’.
Just three days before the historic UK Brexit referendum, the ‘Brexit Barometer’ tracked by leading UK online trading firm IG Group Holdings plc (LON:IGG) shows a 73.5% chance of the Remain side winning the June 23 vote.
We would remind our readers that the IG Brexit Barometer is not a poll of the actual expected referendum result. Most of those including the IG-Survation poll show a much closer expected vote, with Remain holding a slight edge over Leave as of today (Monday June 20). IG and Survation will come out with their final pre-referendum poll tomorrow afternoon.
What the Barometer does show is what traders are predicting will happen (i.e. either Remain will win or Leave will win) when the final votes are tallied, not what the Remain vs. Leave margin will be. The data is based on the political binary market IG has created for clients to trade on.
For example, even if polls were showing Leave to be in the lead (which they were last week), the Brexit Barometer would still measure where traders are putting their money to ultimately win. And it seems that traders putting real money down on the eventual outcome were still betting that the Remain side would rally and win.
The IG Brexit Barometer chart (see below) shows that traders have always been betting on a Remain win since trading began back in January. It hit a low point late last week of a 58% chance of a Remain victory, and dropping, as polls last week showed building momentum and a lead for the Leave side.
However the June 16 murder of popular pro-Remain MP Jo Cox seemed to take the wind out of the sails for the Leave camp, and polls over the weekend pointed to a turnaround in favour of Remain. The improvement in the Remain side’s polling led to a large rally Monday in the GBP, and in the financial markets generally.
IG often sets up binary markets on elections, allowing traders to bet on the final outcome. And since the traders are putting real money to work, not surprisingly IG clients have a strong track record in correctly predicting political events. In 2012 they correctly predicted Barack Obama’s Presidential election victory and Boris Johnson’s London Mayoral election victory. They also correctly predicted a victory for the “No” vote in the Scottish independence referendum in early 2014.
Matt Brief, Head of Dealing at IG Group, commented:
Throughout the campaign traders have shown staunch support for a Remain victory. There is a clear reluctance in the market to agree with the poll information that has been produced, which explains the disparity in the polling and trading market figures. Traders are clearly expecting a swing to Remain as people cast their votes.