FXCM 12.63 0.00%
0.00 (0.00%)
Pre-market: 1.49 -11.14 (-88.20%)
Jan 16, 9:18AM EST
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Currency in USD
http://www.bidnessetc.com/32746-fxcm-inc-nysefxcm-may-enter-insolvency/FXCM Inc, the largest US foreign-exchange brokerage, is struggling to keep up with capital requirements. It was down almost 15% on Thursday, and is down more than 75% in pre-market trading on Friday. A majority of clients suffered massive losses on their Swiss “safe-haven” trades.
After the SNB surprisingly removed a three-and-a-half year old peg with the euro, the Swiss franc rallied more than 30%. FXCM said on Thursday that it might be in breach of some regulatory capital requirements, as the Swiss franc’s move has led to debit balances.
The movement in EUR/CHF pair has led to significant losses for clients, and has triggered numerous margin calls. Due to the sudden crash of EUR/CHF pair, the losses led to negative equity balances owed to FXCM, which total to about $225 million. FXCM is currently in talks to bring back its capital levels to those before the SNB announcement.
Alpari UK, a foreign-exchange brokerage operating from the other side of the Atlantic, announced it has entered insolvency due to the Swiss franc’s frantic movement.
“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,” said Alpari UK in a statement.
“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.”
Alpari UK said that both of their liquidity providers - primary and backup - went unresponsive or liquid for hours after the SNB announcement. Majority of the account holders were on the losing side of the franc trade, leading to negative capital balances.
