franc shock shuts some FX brokers; regulators
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[January 16, 2015]
By Anirban Nag and Elzio Barreto
LONDON/HONG KONG (Reuters) - Retail foreign
exchange brokers from New Zealand to New York were nursing hefty losses
from the Swiss National Bank's shock move to abandon a cap on its
currency, with some even being forced out of business.
Retail broker Alpari UK filed for insolvency on Friday after
customers sustained losses following the SNB's decision.
"The recent move on the Swiss franc caused by the SNB's unexpected
policy reversal of capping the Swiss franc against the euro has
resulted in exceptional volatility and extreme lack of liquidity,"
Alpari, the shirt sponsor of English Premier League club West Ham,
said in a statement.
"This has resulted in the majority of clients sustaining losses
which exceeded their account equity. Where a client cannot cover
this loss, it is passed on to us. This has forced Alpari (UK)
Limited to confirm that it has entered into insolvency."
Online trading-services provider London Capital Group Holding
suffered franc-related losses that it said would not exceed 1.7
Such losses have raised questions about the future of retail trading
in the high-octane world of foreign exchange. The latest survey from
the Bank of International Settlements puts the share of retail trade
at nearly 4 percent of daily spot turnover of nearly $2 trillion.
Regulators in New Zealand and Hong Kong said they were checking on
brokers and banks trading the Swiss franc, after reports of
volatility and losses.
The franc surged as much as 30 percent to a high of 0.8500 per euro
after the SNB caught markets off guard when it stopped capping the
franc at 1.20 per euro on Thursday.
New Zealand foreign exchange dealer Global Brokers NZ Ltd closed due
to hefty losses. The national Financial Market Authority said it
would "be seeking assurances that the client funds have been
protected and segregated".
The Hong Kong Monetary Authority said it was "following up with the
banks on their practice in this regard ... to understand the
implication, if any, but we would not comment on the situation of
New York-listed FXCM Inc, one of the biggest platforms catering to
online and retail traders of currencies, said it may be in breach of
some regulatory capital requirements after its clients suffered $225
million of losses. Its shares were down 80 percent in pre-market
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Foreign exchange broker OANDA said in a statement it "will pardon
our clients' negative account balances associated with this market
event" and would not "re-quote or amend" clients' trades on the
OANDA's move contrasted with Denmark's Saxo Bank, one of the biggest
players in retail foreign exchange trading, which said late on
Thursday it would potentially set different rates for its clients'
Saxo Bank's chief financial officer Steen Blaafalk told Reuters some
clients had suffered losses, but the bank was well capitalized.
Retail investors, some of whom face huge losses, protested when Saxo
said on Thursday it might set different rates for transactions.
"It'd be nice if there was a legal issue, but there isn't," said a
Hong Kong media reported clients of HSBC Holdings were able to buy
the Swiss currency at below-market rates for several hours through
its online system, making several thousand dollars in profits on the
HSBC said online foreign exchange trading for the Swiss franc "is
currently operating normally and we will investigate reports that
customers could trade at old rates initially after the cap was
(Additional reporting by Michelle Chen, Andrew Winterbottom and
Alasdair Pal and Lincoln Feast; Editing by Ruth Pitchford)
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