Should hedge funds be banned from EU exit polls?
Tom Watson calls for action against 'avaricious plan' as financiers look to cash in on referendum vote
Labour's deputy leader Tom Watson has called for a ban on hedge funds and others being able to commission private exit polls to inform bets on the outcome of the EU referendum.
The Financial Times reported yesterday that a large number of financiers and others, including banks, are approaching polling organisations to commission exit polls and even obtain hourly updates on voting trends throughout 23 June.
"By finding out the voting patterns early… 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," the paper says.
But Watson has angrily attacked the practice of pollsters selling private data in this way. "Information about a historic vote that will shape the future of our continent should be made available to everyone at the same time, not shared among a privileged few whose only motive is to gain financially," he told The Guardian.
Calling on Prime Minister David Cameron to "put measures in place to prohibit this avaricious plan", he also took a swipe at the wider opinion polling industry.
He said: "In the longer-term, it's time we took a long, hard look at how the opinion poll industry in the UK, whose findings are often unreliable, impacts on our elections, media coverage and political decision-making."
However, the hedge funds are not seeking to do anything illegal and this is something investors always do before major votes such as general elections, says Stephen Pope on TradingFloor.
Under Electoral Commission rules, private companies are permitted to commission polls and receive updates on voting patterns on the day of the referendum, as long as the findings are not made public until the polls close and influence voting intentions.
Pope adds that trade of this data, "which will evolve throughout the day", fulfils a key market function of allowing traders to hedge bets on the movement of sterling one way or another. This could be useful to big and small firms that export or import goods alike, as well as to the pension funds and others whose money is being invested by the hedge funds.
As for fears that big movements on currency markets could undermine the principle of not publishing exit polls by exposing voting patterns, Delphine Strauss in the Financial Times says this is not worth worrying about as the surveys are "not to be trusted".
She compares exit polls such as those carried out for general elections by the BBC, which it has "conducted time and again at the same polling stations", with a referendum exit poll that has "no precedents to help… [give] a representative sample of the national vote".
In addition, trading is likely to be generally sparse as most investors await the final result before committing their funds, meaning "bets that are placed could… lead to bigger swings than normal in the exchange rate".