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Will Swiss franc storm claim more scalps?

Tuesday, January 20, 2015 - 02:13

A leading European foreign exchange broker has filed for administration after last week's violent swing in the Swiss franc. As David Pollard reports it's not the only foreign victim of the SNB's shiock decision to abandon its currency ceiling against the euro.

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London - it's a forex trading giant. Some industry players are now suffering a headache just as big after Switzerland's decision to remove its currency cap. Alpari is looking for a buyer after confirming losses have forced it into administration. IG Group is said to be interested. But has its own bills to deal with after the Swiss move sent the franc skyward, resulting in stiff losses for some traders. And the saga is exposing flaws in how the industry works. According to Justin Urquhart Stewart of Seven Investment Management. SOUNDBITE (English) JUSTIN URQUHART STEWART, SEVEN INVESTMENT MANAGEMENT, SAYING: ''You've had unfortunately when it comes to foreign exchange and, come to that, other areas of investment and the spread-betting world, businesses which are based on frankly rather dangerous models. When you look at some of the figures which are coming out of some of the foreign-exchange spread-betters, and certainly some recently which I've seen coming out of France, 90% of their clients lose money. That's not a very good basis for running a business.'' Others are in the spotlight too. In Poland, an emergency group of finance officials have been meeting top banks. They want a relief scheme for holders of Swiss franc mortgages - 36 billion dollars of them at their last count. Borrowers are facing much bigger payments after the franc soared against the local zloty. The Croatian government is also under pressure for a similar scheme. And Denmark has been forced to deny rumours it may be next in line to drop its cap after Switzerland. It's already pushed its deposit rates deeper into negative territory to repel currency inflows. But the peg against the euro faces an imminent threat - from the ECB. SOUNDBITE (English) JUSTIN URQUHART STEWART, SEVEN INVESTMENT MANAGEMENT, SAYING: ''The euro will be weakening and probably will be weakening significantly with the announcement of its potential QE later this week. Depending on how far that goes, anybody who has caps related to the euro will find the pressure on that far too much. Caps are fundamentally dangerous because what you're trying to do is stand against market forces and most people who live through the cycles long enough know that the market forces are stronger than most pegs.'' CMC Markets, Swissquote and Oanda are among other industry players reported to have taken losses. And players of a different kind too: the collapse of its main shirt sponsor inflicting an unexpected foul on UK premier league football team West Ham - an estimated shortfall of £750,000 in its finances.

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Will Swiss franc storm claim more scalps?

Tuesday, January 20, 2015 - 02:13