Numerous FX Brokers Shutter After Suffering "Significant Losses" Following SNB Stunner

Tyler Durden's picture

Update: 2 more FX brokers have just gone belly up, UK-based Calpari and New Zealand's Excel Markets.

From Alpari's statement: 

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.  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. This has forced Alpari (UK) Limited to confirm today, 16/01/15, that it has entered into insolvency. Retail client funds continue to be segregated in accordance with FCA rules.

This is what Alpari's CEO, James Hughes, who dubbed the SNB move as "horribly irresponsible", for obvious reasons now, said:

"I'm sure this isn't the last we'll hear on the subject and the SNB are going to be heavily scrutinised in the coming weeks for what appears to be a horribly irresponsible move on their part. For years central banks have tried to avoid days like today by being transparent and making moves like this over time while drip feeding their intentions to the markets. The SNB have shown themselves to be amateurs today and there is many people that will suffer considerably as a result."

And  here is New Zealand brokerage Excel Markets confirming it too would not continue operations.  "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 on to us."

* * *

In a re-run of the catastrophic trading losses that occurred around the Russian Ruble collapse last month (as we described here and here in great detail), two FX brokers (US-based FXCM and New Zealand-based Excel Markets) announced tonight that they “can no longer meet regulatory minimum capitalization requirements," due to "significant losses" suffered by clients. For FXCM these losses mean a $225 million negative equity balance and they are actively discussing alternatives with regulators. For Excel Markets, it is over... "we will not be able to resume business...Client positions will be closed within the next hour."

FXCM is in trouble...

  • *FXCM: CLIENTS EXPERIENCED SIGNIFICANT LOSSES AFTER SNB MOVE
  • *FXCM: NEGATIVE EQUITY BALANCES OWED TO FXCM ABOUT $225M
  • *FXCM: MAY BE IN BREACH OF SOME REGULATORY CAPITAL REQUIREMENTS
  • *FXCM DISCUSSING ALTERNATIVES TO RETURN CAPITAL TO PRIOR LEVELS

FXCM an online provider of forex trading and related services worldwide, announced today due to unprecedented volatility in EUR/CHF pair after the Swiss National Bank announcement this morning, clients experienced significant losses, generated negative equity balances owed to FXCM of approximately $225 million.

As a result of these debit balances, the company may be in breach of some regulatory capital requirements.

We are actively discussing alternatives to return our capital to levels prior to today's events and discussing the matter with our regulators.

*  *  *

The broker's stock has collapsed...

 

National Futures Association is in contact with FXCM...
“We are in contact with the firm and the CFTC and have no further comment at this time”: Karen Wuertz, spokeswoman for the National Futures Association, the futures industry’s self-regulatory agency.
*  *  *

And Excel Markets is done (as ForexLive's Adam Button explains)... Forex broker Excel Markets calls it quits on SNB shocker

Clients of New Zealand forex broker Global Brokers NZ Ltd, which operates Excel Markets, have been told the company “can no longer meet regulatory minimum capitalization requirements of N$1,000,000 and will not be able to resume business.” Client positions will be closed within the next hour.

Here is the statement (the emphasis, bolding and caps is theirs):

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. Both our primary and backup liquidity providers became unresponsive or illiquid for hours after the event. 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.

 

ALL OPEN POSITIONS MUST BE CLOSED BY 5PM NEW YORK TIME OR THEY WILL BE AUTOMATICALLY CLOSED AT THAT TIME. NEW POSITIONS CANNOT BE OPENED AS OF THIS TIME.ALL CLIENT FUNDS ARE IN SEGREGATED ACCOUNTS AND NEVER USED FOR LP MARGINS. 100% OF POSITIVE CLIENT EQUITY OR BALANCE IS SAFE AND WITHDRAWABLE IMMEDIATELY.

 

Global Brokers NZ Ltd. STP’s 100% of order flow and has sustained a total loss of operating capital.GBL can no longer meet regulatory minimum capitalization requirements of N$1,000,000 and will not be able to resume business. Losses incurred on trades that could not be exited due to illiquidity were losses incurred directly with the liquidity provider and we do not have the ability to reimburse those. Please note the interbank market for francs was illiquid for hours after the event and no traders with an open franc position were able to close it for a significant period of time, at any broker.

 

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.

In my opinion, any broker that uses ALL CAPS deserves whatever they get.

We’re encouraged that client funds are segregated. They won’t be the last to go under on this and we hope that everyone has been prudent with client money.

*  *  *

Which likely explains the carnage after the market close today in EURCHF

 

*  *  *

Update: A 3rd FX broker - Canadian firm OANDA says suffered loss on Swiss Franc move...

Brokerage says client enquiries, withdrawals and deposits are being handled as normal, according to a statement on its website:
In the wake of unprecedented market events this morning, OANDA demonstrated its ongoing commitment to doing right by its clients.
 Despite suffering losses and vanishing liquidity in the institutional hedging market, OANDA remained true to its 14-year legacy of transparency, integrity and fairness to our clients. OANDA did not re-quote or amend any CHF cross client trades. We even took the further step of forgiving all negative client balances that were caused when clients could not close out their positions fast enough.
 
Client inquiries are being handled normally and those making withdrawals and deposits are able to do so as normal.
 
OANDA is proud of its strong reputation for fairness and integrity. We thank our customers for their continued loyalty and welcome new traders who want to experience outstanding service and execution.

We will see...

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Vampyroteuthis infernalis's picture

FX crash! Algos gone wild!!!

quintago's picture

And they thought they can just put traders on opposite sides of some ficitious electronic trade, and take the spread without any risk. They obviously didn't take this eventuality into consideration. This is what you call deacon risk. You forget to account for the black swan, and you get a deacon your ass.

knukles's picture

"Broker suffers losses" = Oxymoron.

Lender to over-leveraged amateur dweebs speculating in foreign exchange markets gets fucking hammered

Soul Glow's picture

Somewhere in China 100 million housewives called out in horror.

kliguy38's picture

Yeah........watta tragedy......some parasites got droned

El Oregonian's picture

It only gets bitter from here....

Squid-puppets a-go-go's picture

indeed

going forward from here, Emperor Draghi has the entire swiss establishment calling it straight on his New Clothes

CrazyCooter's picture

And to think I get down votes for keeping my extra cash in a safe deposit box.

When this pile of kindling finally catches, it will burn baby burn ... fiatsco inferno ... and deals will be had by those with CASH.

Regards,

Cooter

walküre's picture

As quick as the SNB made its move and surprised everyone (allegedly), as quick can any CB announce a new currency and exchange old for new at whatever ratio. Usually holders of old cash lose out. The whole point of a reset or a currency reform is to wipe out debt which equals wealth.

I hold cash and it makes me very very nervous.

Sirius Wonderblast's picture

I want to see how the usual suspects did out of this. They seem remarkably quiet.

Haus-Targaryen's picture

Seems like my comment yesterday was a bit tame. Many people lost a lot more than their Xmas bonus.

That being said -- to those of you who lost jobs yesterday due to the snb -- I'll say you should count your blessings -- you got termed before the coming storm. You're in the front of the unemployment lines and the banks still work.

For those of you who work for companies who barely squeezed by this and are today breathing a sigh of relief -- you're next. Prepare yourself.

eclectic syncretist's picture

Yes.  This time around it appears that the owners of the Central Banks will use their printing presses and taxpayer backings to take out the smaller banks and brokers.

Stevious's picture

Hold your cash in nickels.  Of course $10,000 = 2200lbs, it's theft resistant, heck even the cops won't want to bother carrying it away under civil seizure.  Were currency to change it'll still be worth its weight in nickel/copper.

.

SuperRay's picture

These fucking parasites and remora are pissed because the game was not as rigged as they thought - Hah! 

Go get a real job you deadbeat fucks!

OceanX's picture

"...Hold your cash in nickels."

The Delta Bluesman Robert Johnson was bought up to Chicago to record.  He ended up in a scuffle and his producer had to bail him out. The producer checked him into a hotel and gave him 30 cents.  Just as he got home, the phone was ringing, he answerd,  it was Robert Johnson,

Robert said, "I'm lonely"

"what?"

Robert, "There's a girl here and she wants 35 cents, I'm lonely and I lacks a nickel..."

Budd aka Sidewinder's picture

Well..somebody better go back and get a SHITLOAD of dimes!

sessinpo's picture

If you get downvotes (which I didn't vote you down), it's because you kept your stuff in a safety deposit box.

That shit got confiscated or you were unable to access it when bank holidays were declared.

shouldvekilledthem's picture

Cash is just an IOU. It's not going to worth anything, anyone who think otherwise should look up history right from the roman times.

Gold and crypto are the only true forms of money.

Gent's picture

As long as the Rothchilds got their customary heads-up, it's all good.  They could care less about the wailing lamentations of a 100 million chinese housewives who just got their asses blown out of the water by the SNB..

giovanni_f's picture

What can possibly go wrong in a self-regulated casino business. Has any other business on the planet simillar far-reaching privileges and authority to determine what's wrong and right? I can only come up with those Sharia courts in India in order to appease the muslim minority there.

BlindMonkey's picture

I am waiting for the FX traders to start throwing themselves out of windows any day now.

CrazyCooter's picture

You pine for the days of rail travel, free markets, and getting married still a virgin.

They just call old 'Yellin now a'days.

Regards,

Cooter

Greenskeeper_Carl's picture

Hahahaha you've been corzined, people

Spitzer's picture

This is the kind of stuff worth signing up for. lol

Fish Gone Bad's picture

Did anything get resolved with MF Global? Its not like Corzine raised a great deal of money for the Obama campaign.  Oh wait, he did.

dogbreath's picture

Spitzer,  did you see my reply

GetZeeGold's picture

 

 

Did you address it to number 9?

gimme-gimme-gimme's picture

Those FX "speculators" are the the worst scum possible. FX "traders" make people on welfare look like they are doing an honest living.

Guess the losers who got butt rapped hard have to get a job or go kill themselves or something.

GuyJeans's picture

Ya, because trading FX is so easy.  Retail traders are rolling in money /sarc

Tall Tom's picture

"Broker suffers losses" = Oxymoron.

 

 

Nothing can be truer than that Knukles...

 

Brokers just serve as a conduit to facillitate a deal. That is their function. They collect a fee, usually a percentage, to provide that service.

 

If there is no deal then there is no fee for services rendered as the service has not been rendered.

 

They are not supposed to lose ANYTHING as they are not supposed to have any skin in the game. It is unethical if they do.

 

It is not a conflict of interest...There is another term for this which escapes me presently...when they have their own skin in the game.

 

Help me out.

 

But that is a great point...Knuks

medium giraffe's picture

Agree Tom, the problem being that they offer their own off exchange rate based on liquidity provider prices, so they do suck up that risk. The only way around this is to use an ECN broker that provides direct access to the interbank network - but this isn't really doable for several hundred thousand tiny $1000 accounts, so these fx bucket shops become off exchange more often than not. Expect more of the same in the next week.

F22's picture

"Broker suffers losses" = Oxymoron.

"Broker suffers losses" = Redundant

There...fixed it for ya...

I MISS KUDLOW's picture

Does anyone know if Russia holds JGBS,,,,,just askin

disabledvet's picture

This is a very good question.

 

Japan did complain of "excessive Chinese buying of JGB's" pre Fukushima.

 

OANDA is big at SA too.

Just Take It All's picture

Actually, if the trades were fictitious, the broker would have made enormous profits today.  The trades were real, the customers lost all of their money and all of the broker's money that the customers had borrowed from the broker.  Now the broker is totally out of funds and will need to pursue the customers for money the customers now owe to the broker.  The broker set the margin requirements too low.

quintago's picture

Well, the trades were fictitious, until they weren't. That's the only way you can see the FX deals allow leverage up to 100x on some pairs. 

KnuckleDragger-X's picture

FX is a weird game with unpleasant surprises hidden away. I figure the US will lose reserve status before too much longer and since no other currency is resilient enough to replace it we'll wind up with a currency basket and then Forex could turn into a real blood sport.

divingengineer's picture

I lost hundreds of thousands of dollars before I decided it was not for me. luckily it was the Scottrade practice account.

RegularJoe's picture

My account got wiped out with Excel Markets. Made a little bit back with CitiFX and Tickmill. Both have told me that it is business as usual and have also informed clients: http://www.tickmill.com/company-news/record-high-volatility-eurchf/

It was a disaster for many traders and I feel very sad. I hope it is the last time in this century.

I am still at breakeven when looking at my trading so I think I need to make a decision one moment what to do about all this.

aPlayer's picture

There will be huge implications on the FX brokerage markets and today is the start of a process where a lot of the companies will become rich overnight. Currently the list of brokers who in some cases have already started to buy out other brokers includes: CitiFX, IronFX, IG Markets, Tickmill, FXPro, Oanda.

FXCM was just an arrogant group of people who like MFGlobal thought that they are invincible.

Renewable Life's picture

UHHHHHHH OHHHHHHH

The real fun is just starting now! Until the bailouts start, a minimum of 225+ million dollars (most likely in the billions) of someone's fucking money just vanished into thin air from one night to the next, and while the CB's wouldn't even sneeze at that, 225 million dollars vanishing from real people who thought they had it last night, could and will have a very serious cascading effect on real spending, etc etc

If this really gets rolling, let the panic and pissing in the pants begin, because NO ONE knows what that dumbfuck in charge will do, with regard to bailing out wall street and banks THIS time around, and who knows what price they will have to pay for it??  A receipe for some fucking real panic and fun IMO!

sodbuster's picture

I've told many people this, and I always get the deer in the headlights look. Assets can disappear overnite, vanish into thin air, debt never disappears, it has to be satisfied. It has to be paid off or wrote off. Someone's debt, is someone else's  asset.

HardlyZero's picture

Day of the Dollar, 2005

Stephen Roach, Andy Xie, Maarten Schinkel, Cees Maas, Rob de Wijk, Kees Vendrik, Schiff.

https://www.youtube.com/watch?v=AuPgdZeAFjA

Vpro Backlight.

junction's picture

Hopefully, Hillary Clinton's blind trust got blindsided by the Swiss currency fluctuations.

SHRAGS's picture

No way, she always comes out on top:

Hillary Rodham Clinton was allowed to order 10 cattle futures contracts, normally a $12,000 investment, in her first commodity trade in 1978 although she had only $1,000 in her account at the time, according to trade records the White House released yesterday.

The computerized records of her trades, which the White House obtained from the Chicago Mercantile Exchange, show for the first time how she was able to turn her initial investment into $6,300 overnight. In about 10 months of trading, she made nearly $100,000, relying heavily on advice from her friend James B. Blair, an experienced futures trader.

 

Washington post: http://www.washingtonpost.com/wp-srv/politics/special/whitewater/stories...

dolbiere's picture

the records were from the white house. who was on the losing (briber) trade was never revealed. probably tyson foods. my opinion only.