Subject: Francogeddon: The Swiss Franc Mega-Move Fri Jan 16, 2015 1:47 am
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Subject: Re: Francogeddon: The Swiss Franc Mega-Move Fri Jan 16, 2015 1:48 am
Global Brokers NZ goes bust after Swiss move
A New Zealand currency brokerage has gone bust as a result of the Swiss central bank's dramatic policy reversal overnight. Global Brokers NZ, trading as Excel Markets, has placed a notice on its website saying it had sustained a total loss of capital and no longer met regulatory capital requirements. The brokerage said the huge moves in the Swiss franc had led to losses for clients that exceeded their account equity. "When a client cannot cover their losses it is passed onto us," it said. Clients with positive balances in their accounts were safe and open to withdrawals, it said. Reuters reported overnight that the Swiss National Bank shocked financial markets by scrapping a three-year-old cap on the franc, sending the currency soaring against the euro. On social media, the move was dubbed "Francogeddon". The Financial Markets Authority said it was seeking a status update from Global Brokers "and we will be seeking assurances that the client funds have been protected and segregated as they have noted in their statement today." Global Brokers was an authorised securities dealer but was in the process of applying for a derivatives issuer licence under the Financial Markets Conduct Act which came into force on December 1. Global Markets is owned by a number of companies registered in the British Virgin Islands tax haven. Companies Office records show its managing director David Johnson is resident in Ireland. In an emailed statement to news site Forex Magnates, he said: "We are devastated by the loss of Excel and our funds, it is a project we have put a lot of work into and customer satisfaction was very high. We have sustained a total loss of all our funds on margin at our [liquidity providers]. The silver lining here is that client funds are unaffected, as it should always be." Its New Zealand compliance director Roger Bell could not be reached for comment. Greg Boland, director of financial markets for New Zealand brokerage OM Financial, said Excel Markets appeared to be based in Ireland, "which begs the question of why they were operating out of New Zealand." "The main issue is why haven't they got enough capital and did they hedge their position or not?" Howard Wilcox of Auckland brokerage KVB Kunlun said the Swiss move was "a huge event" unprecedented in the last 20 years. "The only thing comparable was when [US] President [Ronald] Reagan was shot." More brokerages were likely to announce adverse positions in the next few days, he said. While New Zealand clients tended not to trade Swiss francs, "it was a very interesting night. I wouldn't want too many of those." New York Stock Exchange listed currency brokerage FXCM yesterday said its clients owed US$225 million (NZ$287m) on their accounts "due to unprecedented volatility in EUR/CHF pair after the Swiss National Bank announcement this morning." "As a result of these debit balances, the company may be in breach of some regulatory capital requirements." London-based broker IG Markets told the London Stock Exchange it had suffered a "negative financial impact" from the Swiss move. "The precise level of the impact will be partially dependent on the Company's ability to recover client debts, but in total it will not exceed £30 million, from market and credit exposure." National Australia Bank head of research for UK and Europe Nick Parsons told Bloomberg he would be "astonished if we did not see more casualties." "This was a 180-degree about-turn by the SNB. People feel hurt and betrayed." The statement from Excel Markets said it was experiencing hundreds of withdrawal requests. "News of the impact of this event on companies and traders is just beginning to come to light. As directors and shareholders we would like to offer our sincerest apologies for this devastating turn of events, and to thank you for being such a supportive group. "We ask that you place withdrawal requests for your account balance at your earliest convenience and allow for minor delays as our team begins to experience higher than usual service volumes." HOW IT WORKS Many currency brokerages operate on a model known as "straight through processing". This means they take a client's order and, after taking a margin, pass it straight to a liquidity provider, usually a bank. If prices move against a client, the client's position is automatically closed off at the next available price and the loss billed to their account. However, the huge moves in the Swiss franc meant the next available price could cause losses bigger than the client's available funds. In those cases the brokerage would still have to settle the trade with the liquidity provider immediately. It is thought those costs wiped out Excel Markets available capital and caused it to go bust.
Subject: Re: Francogeddon: The Swiss Franc Mega-Move Sat Jan 17, 2015 12:52 am
Swiss Move Prompts Fears of Sustained Market Tumult
Updated, 8:47 p.m. | The Swiss central bank’s surprise decision to remove the cap on its currency has incited investor fears that a spate of bank and fund losses could lead to a sustained bout of market turmoil beyond the ability of central banks to ride yet again to the rescue.
The Swiss franc soared against the euro, which tumbled in value against the dollar after the move by the central bank on Thursday. The yen pushed upward, emerging market currencies gyrated and the price of oil rose sharply, reversing its recent fall.
The last few days have been a time of “volatile volatility,” to use the words of a top Citigroup executive — trader jargon for a series of sharp, disorienting moves in stocks, currencies and bonds that can ultimately lead to market-rattling events like the collapse of a major bank or investor.
This was the explanation used by FXCM, one of the largest foreign exchange trading platforms for individual investors in the United States, when it said on Thursday that “unprecedented volatility” after the Swiss franc’s surge against the euro had led to $225 million in customer losses that might put it in breach of capital requirements. On Friday, the company announced that it would receive a $300 million loan from the parent company of the investment bank Jefferies to allow it to keep operating.
There were other casualties in the currency markets, including several small brokerage firms in Britain and New Zealand.
The question now is whether the much larger players in the $5 trillion-a-day foreign exchange market, global banks like Barclays, Deutsche Bank and others, might have been caught short in significant ways.
Citigroup sustained more than $150 million in losses on its currency trading desks in the turmoil after the Swiss move, a person with knowledge of the matter said on Friday.
The possibility of a big bank suffering a crippling blow as a result of the recent market gyrations appears remote. Yet the losses by big and small players is troubling to market participants because they were instigated by none other than a central bank.
For investors who have taken on increasing amounts of risk in the belief that the aggressive actions of the Federal Reserve, the European Central Bank and others would always bail them out, this comes as a rude shock.
One sales trader at a large European bank said that at a dinner of large investors Thursday night, he had never seen such a “stunned look” on the faces of his clients as they tried to come to terms with the Swiss central bank’s move.
“You could really feel the hurt out there,” said this person, who spoke on the condition of anonymity to publicly discuss his clients’ fluctuating moods.
The only thing that gave these investors — some of the largest in the world — hope is the belief that this action by the Swiss central bank would put even more pressure on Mario Draghi, the president of the European Central Bank, to deliver on a widespread expectation that the E.C.B. will buy eurozone government bonds in bulk.
“We have had this long period in which quantitative easing and zero interest rates have squeezed volatility out of the system,” said Kit Juckes, a foreign exchange strategist at the French bank Société Générale. “Now when you release it, it does not come out smoothly or predictably. This can eat away at investor confidence.”
This is why FXCM absorbed large losses along with its clients and why it said Thursday evening that it might be in breach of its regulatory capital requirements. The Swiss central bank had long said it was committed to buying euros and selling francs, so hedge funds and many others followed blindly in its wake — to their detriment.
FXCM was a small player on Wall Street, but its troubles could hit a handful of larger banks that had lent to the firm. A public filing by FXCM in August last year said that the company could borrow up to $150 million from Bank of America, Capital One, Credit Suisse, Morgan Stanley, UBS, Barclays and Bank Hapoalim, which is based in Israel. At the end of September, FXCM had borrowed only $30 million under the loan facility, according to another recent securities filing. FXCM has not borrowed more than that since, according to people at two banks with knowledge of the loan who spoke on the condition of anonymity.
The $300 million loan from the Jefferies parent, Leucadia National, may help ease any cash flow problems at FXCM. But the Leucadia loan may give limited comfort to FXCM’s other creditors. Leucadia said that its loan was “senior” and “secured,” which means that Leucadia may have priority over other lenders and that it has the right to assume ownership of FXCM’s assets if it does not pay back the loan.
Other small brokers ran into trouble.
Alpari UK, a foreign currency broker in Britain, said on Friday that it had entered insolvency as a majority of its clients sustained losses in excess of their account equity. “Where a client cannot cover this loss, it is passed on to us,” the firm said in a statement on its website.
The broker sponsors the English professional soccer team West Ham United and is featured prominently on the team’s jerseys. It is an independent entity within the association of the Alpari companies, which include affiliates in Japan, Russia, the United States and other parts of the world, according to the company’s website.
In New Zealand, Global Brokers NZ, another online foreign exchange broker, said it was shutting down.
“The dramatic move on the Swiss franc fueled by the Swiss National Bank’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in rare volatility and illiquidity,” David Johnson, the director of the company, said in a statement posted online on Thursday.
Some foreign exchange brokers did better in the face of the tumult.
Oanda, a large online currency trading specialist based in Toronto, said that because of its strong capital position, the firm was able to forgive the losses that some of its clients incurred.
“Some of our clients went negative,” said Ed Eger, the chief executive of Oanda. “But we decided to forgive them and bring their balances back to zero — even though we suffered losses.”
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Subject: Re: Francogeddon: The Swiss Franc Mega-Move Sat Jan 17, 2015 7:15 pm
Chaos on trading room floors after Swiss surprise
Outbursts of obscenities and confusion followed the Swiss central bank's surprise decision to abolish its three-year-old policy of capping the Swiss franc against the euro, according to traders in London's financial district. The U-turn sent the franc as much as 41 per cent up against the euro, the biggest gain on record, a move that one trader estimated may cause billions of dollars of losses for banks and their customers.
Dealers at banks including Deutsche Bank, UBS Group and Goldman Sachsbattled to process orders amid a flood of customer calls and trade requests, according to people with direct knowledge of the events. At least one electronic currency-trading system temporarily halted transactions, adding to the mayhem.
"This is the biggest currency shocker in years and it's likely to create more volatility in the short term," said James Stanton, head of foreign exchange at deVere Group, a financial adviser that oversees about $US10 billion ($12.2 billion). "Trading positions are extremely vulnerable and volume has gone through the roof."
Deutsche Bank was among currency dealers to suffer disruptions to electronic trading, with its Autobahn platform temporarily ceasing to provide quotes, according to a dealer from outside the bank. The Frankfurt-based lender is among the four biggest dealers in the $US5.3 trillion-a-day foreign-exchange market, along with Citigroup, Barclays and UBS, according to Euromoney Institutional Investor.
Market tailspin
Spokesmen for Deutsche Bank, Zurich-based UBS and New York-based Goldman Sachs declined to comment. Some of the bankers interviewed for this story asked not to be identified as they weren't authorised by their firms to speak publicly.
Sitting in front of their screens, dealers around the globe watched the franc hit 1.10 versus the euro, before surging to parity and reaching a record 0.8517 as the SNB dropped its commitment to defend the ceiling introduced in 2011. The Swiss currency jumped as much as 38 per cent against the dollar while volatility climbed to the highest in more than a year.
"The move caught everyone off guard," said David Madden, an analyst at IG Group Holdings, which takes bets on financial markets under the IG Index name. "The Swiss central bank has sent the markets into a tailspin."
As the franc spiked, investors said they found themselves unable to trade it amid a lack of price quotes.
'No liquidity'
"There was a good hour when euro-swiss was untradeable," said Chris Morrison, London-based head of strategy at Omni Macro Fund, a hedge fund which oversees $US550 million. "Clearly there was no liquidity."
Forex.com, a currency-trading website, said it halted services briefly "until we get confirmation from our liquidity providers that we can get Swissie liquidity." Dealing resumed at about 10:30 am London time.
Spread-betters were also hit. IG Group said in a statement the SNB's move will cost the firm as much as 30 million pounds ($55 million).
The turmoil forced top bankers to clear their diaries. At Citigroup, Steven Englander, global head of G-10 foreign-exchange strategy, had all his meetings canceled following today's decision, according to a person with knowledge of the matter.
'Red faces'
With the franc largely frozen against the euro since the SNB introduced the ceiling, the turmoil may have left some investors with losses so large they could even be forced to close, according to a trader at one bank who asked not to be identified.
Anthony Peters, a broker at Swiss Investment Corp., said firms that were selling options tied to the Swiss franc may be among today's losers. They would have lost money as volatility surged.
"Selling puts or vol on the franc was deemed to be SNB guaranteed money for old rope," he wrote in a note to clients today. "There will be some very red faces around as it begins to transpire who should not have been playing that game."
Read more: http://www.smh.com.au/business/markets/chaos-on-trading-room-floors-after-swiss-surprise-20150116-12rfxm.html#ixzz3P7yjdJzm _________________ Anarcho Capitalists Retail , OZschwitz Downunder BoutiqueAnarcho-Capitalists,AnCaps Forum,Anti-State,Anti-Statist,Inalienable Rights Defenders,Non-Aggression Principle,Non-Initiation of Force Principle,Rothbardians,Anarchist,Capitalist,objectivism,Ayn Rand,Anarcho-Capitalism,Anarcho-Capitalist,politics,libertarianism,Ancap Forum,Anarchist Forum,Vulgar Libertarians,Hippies of The Right,Forum for Anarcho-Capitalist,Forum for Anarcho-Capitalists,Forum for AnCap,Forum for AnCaps,Libertarian,Anarcho-Objectivist,Freedom, Laissez Faire, Free Trade, Black Market, Randroid, Randroids, Rothbardian, AynArchist, Anarcho-Capitalist Forum, Anarchism, Anarchy, Free Market Anarchism, Free Market Anarchy, Market Anarchy
Subject: Re: Francogeddon: The Swiss Franc Mega-Move Sat Jan 17, 2015 7:53 pm
Large Everest Capital hedge fund closing after Swiss franc losses
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.
Subject: Francogeddon: The Swiss Franc Mega-Move 
Fri Jan 16, 2015 1:47 am
