It is agreed generally that nowadays business in industry is going through some unusual times. After the Swiss Bank made their moves, many countries saw earth shaking. Banks giving allowances to people in Swiss currency now being sued worldwide, people paying back with high rates, and brokers losing huge amounts of money are today’s news not only in financial related articles.
Since the Swiss franc’s instigation the situation became good for loan takers who agreed to take loans in Swiss franc. But now, after the rate cap for the exchange has been removed, the situation is not so good.
But hard times are seen most clearly in the world of brokerage industry. It is known and estimated from different sources that the loss surpassed one billion dollars in brokerage industry.
FXCM lost 200 million dollars.Sources from Dow Jones revealed that the Barclay’s bank had lost millions of dollars, and Deutsche Bank’s losses were greater than a hundred million dollars. Interactive Brokers revealed that their loss were close to 120 million dollars. The problem with Forex brokers, who seemingly didn’t lose much in comparison with others, is that the profits are not matching to the losses due to clients going away.
Some brokers didn’t have the option in their contracts to cover clients’ negative balance. Furthermore, problems are seen in unclear future of liquidity providers as they are not sure if there are going to be any funds to collect. All the fear is being pressured by rumors related to the situation with the hedge funds.
Losses are going to be seen by Forex companies that had partnership in collateral with companies that are about to face insolvency because regulatory agencies do not protect the funds and they are not in other accounts.
The way to survive the Swiss franc price change was to have good risk policy and reduced leverage on Euro/Swiss franc till level of 1:10.
Ed Eger, from OANDA, speaking about the “black swan” situation with the Swiss franc, said that their company took care of their clients and that nothing interfered in business going as smoothly as it always goes. He made sure that a good company is ready to run even in the hardest times, and that the situation made them even stronger, as they proved to be able to execute their work regularly in such situation.
The CEO at CFH Clearing, Lars Holst said that systems were all automated and solutions for risk at the market. He also stated that the events from Black Swan Thursday will mean a great deal for the industry and it should be taken as a reminder of how a major currency as Swiss franc is can move.
President of FX Primus, Terry Thompson also stated that heir protocols for managing risk helped the situation to be bypassed without suffering many other brokers had to go through.
JFD didn’t feel any disturbance in the business neither, as their Capital Adequacy Ratio has been set safely above the minimum. The only thing that was a sign of some “abnormal” activities at the market was 0.3% of clients saw negative balances.
Iron FX released a statement about the extraordinary situation in which no affection took place on their clients. The system they installed proved to have been working fine.
GKFX said that 25million USD invested in IT will see the benefits as it is going to improve the system more. The company said in a statement that they are “planning on capitalisation on its strong balance sheet, global reach, and extensive product offering“
The director of trading at OFM, Andrew Henderson said that events from Black Swan shall confirm the stability of the company.
Markets.com stated that they are “pleased to announce that this extreme volatility didn’t impact the firm’s strong financial position. Thanks to the company’s robust risk management policies, the Company enjoyed a profitable trading day in yesterday’s session and didn’t have any negative impact from the Swiss Franc’s extreme volatility.”
Dimitry Laush, the CEO at Admiral Markets said that the surprising turn in policy of SNB (Swiss National Bank) might result in difficulties with Forex brokers. He said that Admiral Markets were affected by the „blck swan“ Thursday situation, but that the company has the regulation plan and will move on with all the services that they have been offering.
Sensus Capital Markets weren’t affected by the sudden twist in CHF value, but some minimal losses were apparent. Very strong capital was strong enough to fully absorb the losses and the company will continue to work as before, and – after dealing with this situation as smooth as the did – probably better.
Minimal losses were seen by the Advanced Markets, because the disturbance at the market was dealt with prepared system. Anthony Brocco, Executive Chairman, Advanced Markets Ltd. said: “We came through this period of unprecedented volatility cleanly and we’re on very solid ground and expect zero or minimal client losses.”