h1

Just when you thought June 23rd couldn’t get any more exciting

June 1st, 2016

A private exit poll could trigger a run on Sterling and impact the outcome of the referendum

The FT are reporting that

Hedge funds and investment banks have commissioned private exit polls in an attempt to make profits from the result of the UK’s referendum on EU membership next month.

By finding out the voting patterns early on June 23 and predicting the result, entrepreneurial traders can lay big bets on the result, hoping to be the first to benefit financially from a government-induced swing in sterling since George Soros bet against the pound when it crashed out of the then European exchange rate mechanism in 1992.

Early indications of the likely result in the referendum will be indirectly visible from foreign exchange and sterling derivative markets before the polls close, if big money is bet on the result.

The hedge funds are exploiting Electoral Commission rules that permit exit polls on the day of the referendum so long as they are not published until polls close at 10pm.

Polling companies are finding demand high for their private services on referendum day. “Hedge funds have asked for exit polls and for hourly polls on the day. Banks are certainly commissioning polls for their own consumption that are never released,” said one pollster.

Another pollster said his firm was getting lots of calls from asset managers asking when their next research was coming out: “We are also being asked if we will do polls on the day. People in the City are wanting a head start.”

The cost of a rudimentary exit poll where researchers record votes electronically and send them to headquarters is about £500,000, according to a source in the investment management industry. That is far lower than the potential profits available from finding out whether Leave or Remain is likely to win.

So far, sterling has behaved predictably to ups and downs in the opinion polls, regaining strength recently as the betting odds have suggested the chances of a Remain victory are as high as 80 per cent.

A significant move in sterling is guaranteed on the result of the vote, with a modest rise expected if Remain wins and a sharp drop anticipated if there is a vote for Brexit.

These private exit polls could rival the YouGov Scottish Independence Referendum poll of September 2014 that some speculated cost the country 45 billion pounds as the most expensive poll this country has seen. As Professor Jennings notes, it isn’t hard to envisage mid afternoon on June 23rd, there’s a run on the pound and that impacts on the result of the referendum (my hunch is that such a currency crisis would favour Remain, as voters cling to nurse for fear of worse as the perceived economics risks of Brexit are crystallised with a currency crisis.)
Professor Jennings

If I were Vote Leave, I would be very publicly telling the people and organisations commissioning these private exit polls what Peter Parker was told by his uncle, with great power comes great responsibility, and they should use that power wisely and responsibly, the future of the country is at stake.

For those of us betting on the referendum, on June 23rd we might have to keep as much of a close eye on the currency markets as we do on the betting markets.

TSE