15th of January, 2015! This date will be remembered as the most critical day in the history of modern currency trading.
On 15th of January 2015, 12:30 CET, without any prior notice or even the smallest hint, the Swiss National Bank (SNB) discontinued the minimum exchange rate of 1.20 Swiss francs for an euro. As a result trading with CHF crosses practically stopped, the Swiss franc appreciated abruptly and within few minutes rose by 30% causing monstrous shocks.
The reason SNB introduced the minimum exchange rate 3 years ago, in the summer of 2011, was to protect its currency from overvaluation. Thereafter this mechanism had worked as a Swiss clock without the smallest deviation, until 15th of January when SNB removed the floor and unleashed hell for all forex industry.
In the last few years a lot of traders used the CHF as a safe bet – holding short CHF in order to win from the depreciation without risking to lose from appreciation guaranteed by the SNB. Removing of the minimum exchange rate had the effect of a dam collapsing. The accounts of traders with short positions in CHF and higher leverage became negative in minutes and while brokers were executing orders, those with huge hedged CHF positions could not close them at their liquidity providers – interbank market actually stopped. The CHF appreciated by 30% in minutes, then regained half of the movement and established at parity with the euro.
What’s the aftermath?
Alpari UK – one of the biggest forex brokers in the world entered into insolvency and most probably will exit the business. The amount of the loses is still unknown;
FXCM – announced $ 225 000 000 negative client accounts;
IG Group – losses of £ 30 000 000;
Saxo Bank, Citi Bank, IG announced they will be revising the trades of their clients and will recalculate them if necessary.
What’s the situation at Bulbrokers?
We are glad to announce that thanks to our robust risk management policy we survived this hell intact. We would like to take the opportunity to thank to our risk management and IT department for their professionalism and nerve. Due to them our systems have been working perfectly, the execution has been impeccable, all stop and pending orders were executed properly thus minimizing the risk for our clients.
Thank you for your trust!