CNBC
Foreign exchange broker Alpari UK announced Friday that it had entered insolvency following the Swiss National Bank's (SNB) shock decision to drop its three-year-old peg of 1.20 Swiss francs per euro.
"The recent move on the Swiss franc caused by the Swiss National Bank's unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity," Alpari UK said in a statement.
"This has resulted in the majority of clients sustaining losses which has exceeded their account equity. Where a client cannot cover this loss, it is passed on to us."
The company said that, as a result, it had entered into insolvency, adding that retail client funds would continue to be segregated in accordance with FCA rules.
This came after New Zealand brokerage Excel Markets also announced that it was unable to resume business following the SNB's move.
"Both our primary and backup liquidity providers became unresponsive or illiquid for hours after the event," the brokerage said in a statement.
"The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity. When a client cannot cover their losses it is passed onto us."
The SNB stunned markets on Thursday, when it scrapped its three-year-old peg of 1.20 Swiss francs per euro. Shortly after the central bank's announcement, the Swiss franc soared by around 30 percent in value against the euro, and by 25 percent against the dollar.
Currency trading platform Forex.com suspended trading in Swiss francs after the SNB's announcement. On Friday, the company said it hoped to resume trading in the currency soon.
A number of spread betters, including Forex.com, CMC Markets and ETX Capital, issued statements saying that Thursday's extreme currency movements had not materially affected their companies' financial positions.
Foreign exchange broker Alpari UK announced Friday that it had entered insolvency following the Swiss National Bank's (SNB) shock decision to drop its three-year-old peg of 1.20 Swiss francs per euro.
"The recent move on the Swiss franc caused by the Swiss National Bank's unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity," Alpari UK said in a statement.
"This has resulted in the majority of clients sustaining losses which has exceeded their account equity. Where a client cannot cover this loss, it is passed on to us."
The company said that, as a result, it had entered into insolvency, adding that retail client funds would continue to be segregated in accordance with FCA rules.
This came after New Zealand brokerage Excel Markets also announced that it was unable to resume business following the SNB's move.
"Both our primary and backup liquidity providers became unresponsive or illiquid for hours after the event," the brokerage said in a statement.
"The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity. When a client cannot cover their losses it is passed onto us."
The SNB stunned markets on Thursday, when it scrapped its three-year-old peg of 1.20 Swiss francs per euro. Shortly after the central bank's announcement, the Swiss franc soared by around 30 percent in value against the euro, and by 25 percent against the dollar.
Currency trading platform Forex.com suspended trading in Swiss francs after the SNB's announcement. On Friday, the company said it hoped to resume trading in the currency soon.
A number of spread betters, including Forex.com, CMC Markets and ETX Capital, issued statements saying that Thursday's extreme currency movements had not materially affected their companies' financial positions.
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Black Swan?
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ReplyDeleteNEW YORK: US foreign exchange broker FXCM was given a US$300 million (S$397.8 million) cash injection on Friday (Jan 16) after client losses on the sharp surge in the Swiss Franc left it on weak capital footings.
The funds came from Leucadia National Corp in the form of a secured two-year term loan with a hefty 10 per cent interest rate, the two firms said in a statement.
The loan "will permit FXCM to meet its regulatory-capital requirements and continue normal operations after yesterday's loss of US$225 million due to the unprecedented actions of the Swiss National Bank."
FXCM said early Friday that it faced problems meeting regulatory capital requirements after clients ran up huge losses which their accounts could not cover. The company's shares plummeted 90 per cent before the US markets opened and were immediately suspended on the New York Stock Exchange after trade began.
"We could not be more grateful to Leucadia and its team for their rapid and effective response and to our regulators, who have been willing to work with us through this challenging process," said Drew Niv, FXCM chief executive.
"Leucadia's support and this financing are by far the best alternative for FXCM, our customers, our shareholders, and all other relevant constituencies."
Leucadia, a holding company, is the parent of investment bank Jefferies Group, which itself rescued a major broker, Knight Capital, after it foundered in 2012.
- AFP/fl
ReplyDeleteCW8888: Hedge knows to long and short ie. fight with both hands. But, still can bankrupt.
There is no such thing in the market on "why fight with one hand when you can do with both hands."
The Moral of the Story is we should survive with our best hand.
WASHINGTON - Hedge fund manager Marko Dimitrijevic is closing his largest hedge fund, Everest Capital's Global Fund, having lost almost all its money after the Swiss National Bank (SNB) scrapped its three-year-old cap on the franc against the euro, Bloomberg news reported on Saturday.
Citing a person familiar with the firm, Bloomberg said the fund had been betting that the Swiss franc would decline. The fund had about $830 million in assets at the end of 2014, according to a client report cited by Bloomberg.
It said an Everest spokesman would not comment on the fund and Dimitrijevic did not return calls.
Everest Capital, based in Miami and specializing in emerging markets, still manages seven funds with about $2.2 billion in assets, Bloomberg said.
The SNB triggered big losses around the globe on Thursday when it removed a three-year-old cap on the value of the Swiss franc against the euro, allowing it to soar. REUTERS