The surprise surge in the Swiss franc left currency brokers and banks worldwide licking their wounds on Friday, with at least two brokers declaring insolvency and others warning of heavy losses.
Switzerland’s central bank shocked foreign exchange and other financial markets on Thursday when it scrapped its three-year bid to stop the franc from strengthening.
Within minutes the franc surged by 30 percent, later settling to a 15 percent gain against the euro. The shockwaves were felt in currency markets across the globe and some brokers could not withstand the jolt.
In London, currency broker Alpari UK Ltd — sponsor of English Premier League soccer team West Ham United — declared insolvency after clients’ losses linked to the sharp rise in the franc were passed on to the company.
That followed an announcement by Global Brokers NZ Ltd in New Zealand declaring “a total loss of operating capital,” while leading forex broker FXCM Inc in New York was forced to seek a US$300 million rescue from Leucadia National Corp after clients left it with losses of up to US$225 million.
Major players were humbled by the brutally quick turn of fortune.
“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,” Alpari UK said in a shock 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,” the statement said.
“This has forced Alpari (UK) Limited to confirm today ... that it has entered into insolvency,” it said.
In Auckland, Global Brokers NZ announced it was closing after it sustained losses that meant it could no longer meet New Zealand regulators’ minimum capital requirements.
In that sense, FXCM was lucky to find a savior. Leucadia, parent of investment bank Jefferies Group LLC, injected the funds via a two-year loan that will cost FXCM a hefty 10 percent annual coupon.
“We could not be more grateful to Leucadia and its team for their rapid and effective response and to our regulators, who have been willing to work with us through this challenging process,” FXCM CEO Drew Niv said.
“Leucadia’s support and this financing are by far the best alternative for FXCM, our customers, our shareholders and all other relevant constituencies,” he said.
In London, IG Group PLC said that its losses arising from the matter would total up to ￡30 million (US$45.4 million), but stressed that it was in an “extremely robust financial position.”
Rival City Index Group meanwhile reassured clients that it had not suffered “any material impact.”
In New York, shares of Interactive Brokers LLC lost 6.65 percent in early trade on Friday, after having warned that some clients had reported losses totaling around US$120 million.
The Swiss central bank had been defending a floor of SF1.20 to the euro for three years in an effort to protect Switzerland’s vital export and tourism industries.
Many investors had been buying Swiss francs as a safe haven currency, pushing its value up and hurting the country’s international competitiveness.
However, with the European Central Bank expected to flood the market with euros next week, the Swiss central bank would have faced more pressure to defend the floor.
After dropping as low as SF0.8517 against the euro, it has stabilized around the level of parity.
The Swiss surprise also wrong-footed a number of big banks.
British bank Barclays PLC lost “tens of millions” of US dollars, according to a source who requested anonymity, and Deutsche Bank AG lost on the order of US$150 million, according to a report by the Wall Street Journal.
Citigroup Inc, the world’s biggest currencies dealer, lost more than US$150 million after the Swiss central bank’s surprise decision to let the franc trade freely against the euro, Bloomberg News reported, citing a person briefed on the matter.
The losses occurred on the New York-based bank’s trading desks and are not tied to its relationships with FXCM and other retail trading platforms, Bloomberg said.
Spokesmen for Citigroup, Frankfurt-based Deutsche Bank and London-based Barclays declined to comment.
SEEKING CLARITY: Washington should not adopt measures that create uncertainties for ‘existing semiconductor investments,’ TSMC said referring to its US$165 billion in the US Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) told the US that any future tariffs on Taiwanese semiconductors could reduce demand for chips and derail its pledge to increase its investment in Arizona. “New import restrictions could jeopardize current US leadership in the competitive technology industry and create uncertainties for many committed semiconductor capital projects in the US, including TSMC Arizona’s significant investment plan in Phoenix,” the chipmaker wrote in a letter to the US Department of Commerce. TSMC issued the warning in response to a solicitation for comments by the department on a possible tariff on semiconductor imports by US President Donald Trump’s
‘FAILED EXPORT CONTROLS’: Jensen Huang said that Washington should maximize the speed of AI diffusion, because not doing so would give competitors an advantage Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) yesterday criticized the US government’s restrictions on exports of artificial intelligence (AI) chips to China, saying that the policy was a failure and would only spur China to accelerate AI development. The export controls gave China the spirit, motivation and government support to accelerate AI development, Huang told reporters at the Computex trade show in Taipei. The competition in China is already intense, given its strong software capabilities, extensive technology ecosystems and work efficiency, he said. “All in all, the export controls were a failure. The facts would suggest it,” he said. “The US
The government has launched a three-pronged strategy to attract local and international talent, aiming to position Taiwan as a new global hub following Nvidia Corp’s announcement that it has chosen Taipei as the site of its Taiwan headquarters. Nvidia cofounder and CEO Jensen Huang (黃仁勳) on Monday last week announced during his keynote speech at the Computex trade show in Taipei that the Nvidia Constellation, the company’s planned Taiwan headquarters, would be located in the Beitou-Shilin Technology Park (北投士林科技園區) in Taipei. Huang’s decision to establish a base in Taiwan is “primarily due to Taiwan’s talent pool and its strength in the semiconductor
French President Emmanuel Macron has expressed gratitude to Hon Hai Precision Industry Co (鴻海精密) for its plan to invest approximately 250 million euros (US$278 million) in a joint venture in France focused on the semiconductor and space industries. On his official X account on Tuesday, Macron thanked Hon Hai, also known globally as Foxconn Technology Group (富士康科技集團), for its investment projects announced at Choose France, a flagship economic summit held on Monday to attract foreign investment. In the post, Macron included a GIF displaying the national flag of the Republic of China (Taiwan), as he did for other foreign investors, including China-based
RSS