Surprise Huge Move In Swiss Franc From Switzerland Central Bank

Discussion in 'Interactive Trading' started by leverage, Jan 15, 2015.

  1. jack

    jack Administrator Staff Member

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    That's bullshit.. The broker should have not filled clients at all (like a lot of brokers who just turned off their CHF feeds or didn't execute,) instead of confirming a fill then reneging. This is just the broker passing on their inability to hedge out of positions and being burned by their LPs onto the client.

    In the US, there's regulations saying that the broker can't do shit like this after an hour of confirming the client's fill price. FXDD tried to do adjustments to trader who game'd their feed days and weeks after the trade took place, but got slapped around by the regulators for it.

    ...

    I'm very interested in putting together a list of brokers and their actions during and after the CHF move. Who went bust, who survived, who lost how much, etc... brokers who reprice filled and confirmed orders after the fact because they couldn't hedge out in the underlying market should be shamed. Again, that's not saying the brokers weren't dealing with a horrible event where liquidity was hard to find, just that if they couldn't confirm prices properly, or execute on the back end, then they shouldn't have filled and confirmed client orders. This is mostly a problem for brokers who B-Book, which I've always said isn't a bad thing when the broker is pricing and filling at what would otherwise be market rates.. this is an example of that being violated.
     
  2. Ramy3

    Ramy3 May the pips be with you!

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    Here's a start.

    http://www.forexfactory.com/attachment.php?attachmentid=1591166&d=1421426685
     
  3. foreigner

    foreigner Est. 12480 Hours and Counting

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    I get that FXCM took the biggest hit, after all theyve got public shareholders to burn but how come LMAX came under not applicable?
     
  4. Ramy3

    Ramy3 May the pips be with you!

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    N/A means not available.
     
  5. rod178

    rod178 Well-Known Member

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    CNB press conference 15Jan2015

    http://sem.pmd.swisscomstream.ch/div/snb/20150115/20150115_video.mp4

    http://www.snb.ch/en/mmr/speeches/id/ref_20150115_tjn/source/ref_20150115_tjn.en.pdf
     
  6. rod178

    rod178 Well-Known Member

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    Swiss Franc Trade Is Said to Wipe Out Everest’s Main Fund

    Swiss Franc Trade Is Said to Wipe Out Everest’s Main Fund
    By Katherine Burton Jan 19, 2015 8:02 AM GMT+0800 9 Comments Email Print
    http://www.bloomberg.com/news/2015-01-19/swiss-franc-trade-is-said-to-wipe-out-everest-s-main-fund.html

    Marko Dimitrijevic made a smart bet in December. The hedge fund manager, wagering the Swiss franc would fall, profited after voters there rejected a plan to have the central bank hold a fifth of its assets in gold.

    For the $830 million Everest Capital Global, his Miami-based firm’s oldest and biggest fund, investments from Switzerland contributed 0.6 percentage points to gains that month. Last week, the wager had a far bigger impact. In less than a day, it wiped out the 24-year-old fund, according to a person familiar with Everest Capital, leaving the firm with about $2.2 billion in seven other funds.

    Dimitrijevic, an emerging market specialist who’s navigated at least five debt crises in those markets, was undone by the central bank of the country where he was raised. Last week, the Swiss National Bank unexpectedly let the franc trade freely against the euro, ending its three-year policy of capping the franc at 1.20 a euro.

    The announcement caught traders and investors globally offguard. The currency surged as much as 41 percent versus the euro on Jan. 15, the biggest gain on record, and climbed more than 15 percent against all of the more than 150 currencies tracked by Bloomberg.

    The carnage is widespread. Brokerage firms in New Zealand and the U.K. failed and retail investors have suffered hundreds of millions of dollars of losses on leveraged foreign exchange trades. Citigroup Inc., the world’s biggest currency dealer, lost more than $150 million, according to a person briefed on the matter.

    Some mutual funds were also caught out. The $1.9 billion John Hancock Absolute Return Currency Fund (JCURX) tumbled 8.7 percent on Jan. 15, its steepest drop on record and the most among more than 2,000 U.S.-domiciled funds tracked by Bloomberg with at least $1 billion under management. The strategy is overseen by Dori Levanoni and Jeppe Ladekarl of First Quadrant, a Pasadena, California-based $19 billion investment firm that oversees other funds sold to retail investors and hedge funds.

    Comac Decline
    Comac Capital, a $1.2 billion hedge fund firm run by Colm O’Shea, declined about 8 percent that day. The London-based manager had already fallen 0.5 percent as of Jan. 9, according to an investor update, and has been little changed since 2012, when it declined about 9 percent.

    Profits and losses for most of the hedge fund industry aren’t disclosed yet as managers typically give performance figures at the end of each month and don’t need to reveal the information outside of their investors.

    For Everest, there was no option. The losses were so big they ended the fund.

    Armel Leslie, a spokesman for Everest with Peppercomm, declined to comment on the losses. Calls to Dimitrijevic weren’t returned.

    Dimitrijevic, who is of Yugoslavian descent, has suffered big declines before and rebounded.

    He started his firm in 1990 with $8 million, according to an interview he did for Steven Drobny’s “Inside the House of Money” (Wiley, 2006).

    Navigating Crisis
    Everest grew to $2.7 billion by the start of 1998 after navigating crises in Mexico and Southeast Asia. Russia’s default and currency devaluation in August of that year proved trickier and assets fell by half. One of his funds lost 53 percent that month.

    At the time, he wrote to investors that “the magnitude of the losses on the Russian debt and the speed at which they occurred were something that I have never encountered since I began working in professional money management 17 years ago,” BBC News reported then.

    Assets Gain
    He revived the firm and a decade later Everest was managing $3 billion. Then came 2008, and the global financial crisis. Assets shrunk by $1 billion as his wagers in emerging markets plummeted.

    By the end of 2014, Everest was again at $3 billion, following a gain in his main fund of 41.2 percent in 2013 and 14.1 percent last year.

    Even after last week’s miscalculation, Dimitrijevic still has a group of funds, mostly invested in emerging markets, including Argentina, Nigeria and Pakistan. These are likely to prove safer for him than Switzerland.

    To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

    To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Pierre Paulden
     
  7. the golden gun

    the golden gun RINSE & REPEAT

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    I think this whole event will be an effective deterrent for other Central Banks wanting to peg their currency. Showing just how costly it can be to exit said peg...

    which is a positive in my books
     
  8. rod178

    rod178 Well-Known Member

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    Removing pegs is similar to removing Totalitarian governments, quickly taking the lid off a pressure cooker, eg the aftermath of the breakup of Yugoslavia.
     
  9. rod178

    rod178 Well-Known Member

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    Swiss pegxit put a $70 rocket under gold prices but just wait for the ECB’s QE

    Swiss pegxit put a $70 rocket under gold prices but just wait for the ECB’s QE next week to send prices to the moon

    http://news.goldseek.com/GoldSeek/1421597220.php

    So the Swiss referendum on gold at the end of last year did prove to be a decisive point in the gold market cycle, after all. The fall to $1,138 on the ‘no’ vote marked the low of the cycle. However, for the rocket to send gold prices to the moon this was ‘the right country, just the wrong event,’ as Ross Norman of Sharps Pixley told ArabianMoney.

    That event was the de-pegging or ‘pegxit’ of the Swiss franc from the euro last week. It send gold prices soaring $70 an ounce to above $1,280 an ounce. This is not the first time the Swiss National Bank has played an important role in the gold price.

    Gold all-time high
    It was on September 6th 2011 that the gold price hit its all-time high of $1,923 an ounce and on that date the SNB pegged the Swiss franc to the euro at 1.20. If the pegging was the event that sent gold prices into a long correction, then it will perhaps not be so surprising if this also works in reverse.

    If so that may well not be as a direct but indirect consequence of the depegging. For we have to ask, why did the Swiss do it? Do they perhaps know something we don’t about the size of the European Central Bank’s QE money printing program coming up next week?

    They may know that it is going to be so big that the Swiss peg would not have stood a chance of surviving, so it was a lot cheaper for them to kill it in advance. Money printing on a very large scale usually means only one thing for bullion prices and there is only so much manipulation that the central banks can hope to perform at the same time.

    ECB QE tsunami?
    Even the Fed ‘lost it’ as far as the gold price was concerned in the early years of its QE money printing. One thing is for certain, gold in euro terms will surge in value and that should make it a much more attractive asset class to the 500 million people who live in the European Union. Don’t be fooled this is not just about the eurozone, it is also about the countries around it for whom the bloc is an all-important trading partner.

    So standby for another exciting week for gold coming up. The $70 price spike of last week may look nothing by comparison. Just as nobody correctly forecast the crash in oil prices last year probably nobody is going to get the rise of gold right this year. Volatile markets are very disturbing for crystal balls!
     
  10. rod178

    rod178 Well-Known Member

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    Invast Financial Services re Swiss Franc

    Dear valued clients of Invast,

    As Last Thursday’s action by the Swiss National Bank (SNB) to remove the 1.20 EURCHF price floor was as surprising as it was dramatic and the effect of this policy change on Global Foreign Exchange Markets is virtually unprecedented. Market participants at all levels were impacted and industry fallout has been widespread.

    Invast Financial Pty Ltd (Invast), would like to reassure clients that we remain in a strong financial position. We have more than adequate capital to satisfy regulatory capital requirements as stipulated by ASIC. All client funds remain in the client segregated trust accounts with top tier banks and Invast will continue our best practice policy of not passing client funds to our liquidity providers for the purposes of hedging our client trades. We enjoy the ongoing support and full confidence of the listed Japanese parent company, Invast Securities Co.

    In our correspondence on Friday, we noted a review would be conducted on all CHF positions for potential adjustments. We have completed our review of all executed orders and no client adjustments are required.

    Clients will also be able to resume trading in CHF pairs via MT4 and cTrader with immediate effect. The minimum margin requirement for the CHF pairs has however been revised and will be set at 2% for all CHF instruments.

    Going forward it is business as usual and our full team is here to support you with your trading.

    Thank you,

    ear valued clients of Invast,

    As Last Thursday’s action by the Swiss National Bank (SNB) to remove the 1.20 EURCHF price floor was as surprising as it was dramatic and the effect of this policy change on Global Foreign Exchange Markets is virtually unprecedented. Market participants at all levels were impacted and industry fallout has been widespread.

    Invast Financial Pty Ltd (Invast), would like to reassure clients that we remain in a strong financial position. We have more than adequate capital to satisfy regulatory capital requirements as stipulated by ASIC. All client funds remain in the client segregated trust accounts with top tier banks and Invast will continue our best practice policy of not passing client funds to our liquidity providers for the purposes of hedging our client trades. We enjoy the ongoing support and full confidence of the listed Japanese parent company, Invast Securities Co.

    In our correspondence on Friday, we noted a review would be conducted on all CHF positions for potential adjustments. We have completed our review of all executed orders and no client adjustments are required.

    Clients will also be able to resume trading in CHF pairs via MT4 and cTrader with immediate effect. The minimum margin requirement for the CHF pairs has however been revised and will be set at 2% for all CHF instruments.

    Going forward it is business as usual and our full team is here to support you with your trading.

    Thank you,

    Invast Financial Services
     
  11. jack

    jack Administrator Staff Member

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    63 summaries here:

    http://www.forexcrunch.com/snbomb-reactions-from-10-forex-brokers/

    (I'm not normally a fan of linking to ad-laden sites, but these guys did a good job of rounding all this info up...)
     
  12. AusDoc

    AusDoc Well-Known Member

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    Here Are The Some Behind-The-Scenes Politics In The Decision To Let The Swiss Franc Cause Market Chaos

    Some background: http://www.businessinsider.com.au/the-swiss-national-bank-move-may-have-been-done-to-protect-its-dividend-2015-1
     
  13. sqa

    sqa Village Scribe

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    The interesting bit, which probably won't show up for a while, is if the SNB bought some sort of hedging instrument for the unpegging. We might not find out until 2016 if that happened (annual report), but it'd make a lot of sense.
     
  14. jack

    jack Administrator Staff Member

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    The shear exposure involved would make any hedge, even partial, a huge and obvious tell.

    If they did cover their own ass a bit, I'd be interested in seeing how they executed without tipping the market off.

    (That's not to say they can't do it.. just that I'd be curious how they'd go about it while remaining stealthy.)
     
  15. rod178

    rod178 Well-Known Member

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    Something smells in Denmark, though it originates in Zurich

    http://www.snb.ch/en/
     
  16. sqa

    sqa Village Scribe

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    Well, Belgium holds nearly 80% of GDP in US Treasury holdings, very likely for "someone else" (whoever that may be). There are plenty of ways to hide moves via other channels. Central Banks can pull that off.

    And it's not like some set of Commercials didn't do all of their buying over the low liquidity Christmas time. Nah, no way anyone expected this. Minus the fact that those Commercials just happened to buy up 1/3rd of the entire Franc Futures in very short order.
     
  17. rod178

    rod178 Well-Known Member

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    IC Markets


    IC Markets Still Strong
    Dear Trader,

    The unexpected announcement by the Swiss National Bank (SNB) that it would withdraw the cap on the Swiss Franc’s value against the Euro took many in the industry by surprise and resulted in extreme volatility in the forex markets.

    We were surprised by the extreme volatility after the announcement, however fortunately in December, 2014 we assessed the risks associated with this pair and reduced the leverage offered to clients. As a result of this pre-emptive measure we were able to minimise the impact of negative client equity and provide additional protection for our clients. Despite the significant volatility during the announcement we were able to maintain pricing during periods of low liquidity.

    The new paradigm in the forex market could be characterized by periods of low volatility followed by extreme episodic volatility as we saw with the Russian Rouble in December and now the Swiss Franc last week. Two such events happening within a month of each other should be considered as a sign of the times. We are expecting more volatility like this although not of the same magnitude throughout 2015. We would like to assure you that we will continue to focus on pre-emptive risk management so that our clients remain unaffected by future volatility.

    Our financial position remains strong and above our regulatory requirements with trading unaffected. As always client funds are held in segregated accounts with leading Australian banks NAB and Westpac.

    If you have any questions or require any assistance, please contact one of our support team members via Live Chat, email: support@icmarkets.com, or phone +61 (0)2 8014 4280.

    Kind regards,
    Andrew Budzinski
    CEO
     
  18. rod178

    rod178 Well-Known Member

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  19. rod178

    rod178 Well-Known Member

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    Brokers becoming "Gun Shy"


    Important ECB Announcements
    Dear Trader,

    This is to inform you about the key ECB announcements expected tomorrow(Thursday, 22nd January, 2015)

    All eyes will be on the ECB and Draghi for tomorrow’s press conference( 1:30 PM GMT) With the ECB's interest rate decision also being held tomorrow( 12:45 PM GMT) and a strong belief held that the ECB will use this meeting to announce details regarding their quantitative easing program. Markets and spreads are likely to be extremely volatile and will widen during this period.

    In preparation for ECB's QE/Rate announcement please ensure your account’s exposure is kept to a minimum & is well capitalized to avoid liquidation. IC Markets will be changing the leverage across all pairs to 100:1 during the Asian session tomorrow. Any account with an exposure of greater than 50 times its value will be assessed for liquidation/position reduction prior to the announcement.

    The reduced leverage will be effective until 26th of January 2015, post which normal leverage will be assessed on pairs.

    If you have any questions or require any assistance, please contact one of our support team members via Live Chat, email: support@icmarkets.com, or phone +61 (0)2 8014 4280.

    Kind regards,
    IC Markets Trade Desk
     
  20. Ramy3

    Ramy3 May the pips be with you!

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    Thks for the info Rod,

    Vacation time for me, closed up shop till these markets calm down a bit.

    Markets moving with a vengence scare me.

    Cheers!
     

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