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Forex brokers in dispair after Swiss Franc volatility

EURCHF News by Allie Longford on 14:47 January 17, 2015 EST
The move by the SNB to remove the cap on the exchange rate of the Swiss Franc versus the euro which resulted in the currency appreciating 20% within minutes sent shockwaves through the forex brokers around the world that now hold clients with substantial loses on their accounts, some of which, will be unlikely to be able to repay.

Some forex brokers are in total despair trying to recover losses, literally, wherever they can in a very desperate move.

First known victim is Excel Markets of New Zealand. In their website, the brokerage firm claimed to be the "future of foreign markets". Since Thursday the 15th the homepage contains a "critical note" advising clients to withdraw balances from their accounts as they cease their brokerage activities. This is because they are no longer in a position to provide the capital ratios required.

After rumors on one of the big ones, Alpari, has posted the following statement on its website:

"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. Retail client funds continue to be segregated in accordance with FCA rules. For the avoidance of any doubt and notwithstanding previous announcements by the company, Alpari (UK) Limited has not entered a formal insolvency process. The board of directors are urgently considering all options including a sale and are liaising closely with the FCA. We hope to make a further announcement shortly."

Another big player, FXCM, has sent this email to clients:

"Dear Client,
FXCM Client Accounts Secure – Raises $300 Million in Capital

FXCM previously announced that due to unprecedented volatility in the EUR/CHF pair after the Swiss National Bank announcement of January 15, 2015, clients experienced significant losses and generated negative equity balances owed to FXCM.

To ensure the full financial stability of ALL client accounts, and FXCM, TODAY we have announced that Leucadia National Corporation will provide $300 Million in financing capital to FXCM Holdings LLC.

Normal trading and operations will continue for all of its customers.

The net proceeds will be used to replace capital in FXCM regulated entities.

FXCM will continue to be one of the largest forex brokers globally.

With the investment of the new capital, the Company has returned the regulatory capital it maintained prior to the losses client suffered as a result of the historic movement of the Swiss Franc early Thursday morning.

The company is in compliance with all the regulatory capital requirements in all of its jurisdictions."

The turmoil is assured for the next weeks to come so pay attention to further developments as this could complete change the landscape for the industry.