A short note to say that I hope all of you have not been hurt by the Swiss move on Jan 15.
So far two brokers have gone into liquidation:
- Global Brokers NZ Ltd
- Alpari Ltd (UK)
FXCM was able to find an angel in Jeffries Group LLC to enable it to stave off liquidation.
Huge losses have been sustained by HSBC, Citigroup, Barlays, and Oanda as a result of CHF moves following the SNB.
For those who don’t trade FX….you may not understand why some brokers have found themselves in difficulties.
Broker take a a safety deposit (margin) anywhere from 1% to 5%. A standard lot is 100,000. So, the margin per lot range from $1,000 to $5,000.00 Now let’s look at Thursday’s move as a result of the Swiss announcement.
Figure is a daily chart of the USDCHF. If you were trading a standard lot (100,000), the move from about 1.0200 to .8400, represented a loss (or gain) of US$ 100,000.00. The margins collected would have been inadequate to cover the losses. And, depending on your money management, you could have easily been in serious financial difficulties had you been short the CHF.
To those of us who were not in the CHF, that was a great new year’s present.
FIGURE 1 USDCHF