January 17, 2015 2:30:37 am
The franc surged as much as 40 per cent to a high of 0.8500 per euro after the Swiss central bank lifted its 1.20 per euro cap.
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 individual banks.”
Britain’s Financial Conduct Authority said it was talking to Alpari, while the US National Futures Association said it was monitoring the foreign exchange brokers it oversees. FXCM Inc shares did not open in regular trading after having fallen nearly 90 per cent in pre-market hours. Top executives from FXCM went through company books until at least 5 a.m. EST (1000 GMT) on Friday, according to a source close to FXCM.
Regulators were in FXCM’s offices in downtown Manhattan, according to two sources. A spokesperson for the US National Futures Association said it was in “constant” contact with FXCM, and had been “watching the volatility” as a result of the Swiss central bank move.
NFA rules allow a leverage ratio of 50-to-1 on transactions in the Swiss franc, which means even a 2 per cent move can wipe out a position.
Not all brokerages suffered. GAIN Capital Holding Inc said on Friday it generated a profit on Thursday from trading, and that its strong financial position will allow it to win market share. Shares rose 2.5 per cent.
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