LONDON Reuters - The Swiss franc shock reverberated through currency trading firms around the world on Friday, wiping out many small-scale investors and the brokerages that cater to them and forcing regulators to take a closer look at the sector. In the past 15 years, retail currency trading has grown quickly, attracting individuals staking their own money with long trading hours, low transaction costs and the ability to take on huge risks for a relatively small sum.
This small share means the sector poses limited risk to the financial system but retail brokers are much more vulnerable to big losses than banks. Regulators in New Zealand, Hong Kong, Britain and the United States said they were checking on brokers and banks after reports of volatility and losses.
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. L put its franc-related losses at up to 1. The franc surged as much as 40 percent to a high of 0. National Futures Association said it was monitoring the foreign exchange brokers it oversees. N shares fell nearly 90 percent in pre-market hours before being halted for the regular trading session on the New York Stock Exchange.
In after-hours action, it resumed trading FXCM. Top executives from FXCM went through company books until at least 5 a.
A spokesperson for the U. NFA rules allow a leverage ratio of 50 to 1 on transactions in the Swiss franc, which means even a 2 percent move can wipe out a position.
Not all brokerages suffered. N said on Friday it generated a profit on Thursday from trading, and that its strong financial position will allow it to win market share. Its shares closed up 2. Saxo Bank chief financial officer Steen Blaafalk told Reuters some clients had suffered losses but the bank was well capitalised.
Retail investors, some of whom face huge losses, protested when Saxo said it might set different rates. L 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 trades. All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.
Answers On Innovation Thomson Reuters. Swiss franc shock shuts some FX brokers; regulators move in. Amid political turmoil, Wall Street clings to mantra. Pleas to flee, a desperate video: Inside the oil industry's purge. Pictures of the year. Anirban Nag , Steve Slater. The Thomson Reuters Trust Principles.More...