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Minimum Exchange Rate for CHF Discontinued
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Minimum Exchange Rate for CHF Discontinued

  #31 (permalink)
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mattz View Post
Brokers who went upside down, customers with deficits, largest banks and hedge funds with the best brains were shocked and caught by surprise, but this "genus" had a model that predicted everything.

Obviously not as he thought it was a flaw in his system.

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  #32 (permalink)
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Etiquette


Coach View Post
OK, I'll get off this forum as it appears to have rules I am not complying with

I did ask at the beginning that I am new to this and asked to be excused for my naive question.

I also stated that our software is in beta format. We are therefor not trading and did not make several million as we didn't believe our own forecast. I was trying to find out why everyone was taken by surprise when we have all made use of the same raw data

I also stated that our software is not for sale - it is not for sale!

So why all the hostility I can't understand

Bye

I hope you don't go away because I think you will find this community has tremendous value, and it sounds like you could gain from that.

In my mind there were a couple of problems with your post that caused the reaction from this community that it did. First, although your post was about the recent CHF issues, you were off topic with the purpose of the thread. Had you posted your question on your own thread you probably wouldn't have received the same response. This thread is here to document and shed light on what happened and the impacts of the SNB change. Secondly, the tone of your post seemed condescending. Especially considering the recent outcomes that have occurred. Many traders, retail (ZuluTrade - Trader Performance - SwissRunner) and professionals (A Hedge Fund With $830 Million In Assets Went Bust After The Swiss Franc Surge - Business Insider), lost a lot of money as a result of this change. Many brokers will no longer be in business because of it. To suggest disbelief, and to state that you would have gained from it, is insensitive, and quite frankly, unbelievable.

As to your question, there's nothing wrong with questioning how everyone seemingly got on the wrong side of this. I've wondered the same thing. It's early and there's still a lot of confusion about what exactly happened with regards to traders, foreign exchange brokers, exchanges, funds, banks, etc... I suspect in the coming weeks and months things will become more clear, but who knows. You would expect that there were traders on the other side and did well, but I've yet to see many stories like that.

Were there early warning signs? Yes, by about four or five months. Some foreign exchange brokers (Dukascopy: Reduction of maximum leverage on EUR/CHF exposures | Onestopbrokers ? Forex, Law, Accounting & Market News / Exclusive: Saxo Bank Raises Margin Requirements on Swiss Franc Trading | Forex Magnates) began to question if the 1.20 peg would hold and started to reduce leverage on CHF pairs back in September and October 2014. That said, I doubt anyone could have predicted the reaction we got, and certainly no one could have predicted the timing.

Whether or not you could have been on the right side of this trade is questionable at best. Some traders that bought CHF said their orders didn't enter until the damage was done and then things fell off, leaving them also in the hole. Markets are auctions and when everyone is buying and no one is selling things don't play out like we think they might have.

You present some interesting questions, and hopefully we'll know more in the coming weeks and months. I wish you well.

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  #33 (permalink)
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Fat Tails View Post
The first reaction to the announcement of the Swiss National Bank was fear and unbelief. Stocks went down the wrong way and fell 3%. In the end of the day, FDAX closed up 1.7%.

The move just reflects the weakness of the quote currency, as the Euro went down by 1.4% against the USD.

It was an excellent buying opportunity midday.


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Can anybody explain why deflation of the euro sends the euro up? Is'nt it the opposit with the dollarindex and us stocks? When the dollarindex rises, stocks rise?

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  #34 (permalink)
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humseper View Post
Can anybody explain why deflation of the euro sends the euro up? Is'nt it the opposit with the dollarindex and us stocks? When the dollarindex rises, stocks rise?

European stock prices are quoted in EUR. The Euro is the quote currency. When the quote currency loses value this leads to higher prices mechanically. Price are not higher, because the value of the stocks has increased, but because the value of the quote currency has declined.

However, the devaluation of the EUR has a second consequence. A lower EUR makes European companies more competitive (at least those which have their manufacturing base in Europe and have siginificant exports to non European countries). This secondary effect should also push prices for European stocks.

You will observe the same thing for gold prices. When the US dollar index declines showing that the USD is weak, gold prices typically rise. They are not rising because the value of gold has increased, but because the value of the quote currency has decreased.

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  #35 (permalink)
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Everything You Need to Know

This is not a comprehensive piece but I think it does a good job of explaining some of the economic issues in play with regards to the SNB change.

Absolutely everything you need to understand what happened to the Swiss franc this week ? Quartz

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  #36 (permalink)
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Class Actions

The following is a passsage from the SNB's mandate. Seems to me they may have not adhered to their state aim of price stability.

The SNB conducts the country’s monetary policy as an independent
central bank. Its mandate is to conduct monetary policy in such
a way that money preserves its value and the economy develops
favourably. This mandate is enshrined in the Constitution and
the National Bank Act (NBA). The Constitution (art. 99) obliges
the SNB, as an independent central bank, to conduct a monetary
policy that serves the interests of the country as a whole. The NBA
(art. 5 para. 1) describes the SNB’s mandate in more detail: “It
shall ensure price stability. In so doing, it shall take due account
of the development of the economy.”
A well-organised, stable monetary system is an important prerequisite
for a prosperous economy. With the emergence of nation states, the
creation of money and the organisation of the monetary system were,
as a rule, assigned to a public institution, i.e. the central bank.
The central banks’ origins vary from one country to another. Some
of the oldest central banks were originally state banks which granted
loans to the state and managed state assets. Others were set up
to enhance the stability of the banking system and to counteract the
frequent bank panics.


If retail traders and companies have been burnt the the big boy's pension/hedge funds will be in the same boat and the class actions are sure toi follow, In my view this one has a long way to run. If court cases go against the SNB then it may well have been cheaper for them to defend the 1.20.

Anybody have any views.

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  #37 (permalink)
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LittleJohn View Post
The following is a passsage from the SNB's mandate. Seems to me they may have not adhered to their state aim of price stability.

The SNB conducts the country’s monetary policy as an independent
central bank. Its mandate is to conduct monetary policy in such
a way that money preserves its value and the economy develops
favourably. This mandate is enshrined in the Constitution and
the National Bank Act (NBA). The Constitution (art. 99) obliges
the SNB, as an independent central bank, to conduct a monetary
policy that serves the interests of the country as a whole. The NBA
(art. 5 para. 1) describes the SNB’s mandate in more detail: “It
shall ensure price stability. In so doing, it shall take due account
of the development of the economy.”
A well-organised, stable monetary system is an important prerequisite
for a prosperous economy. With the emergence of nation states, the
creation of money and the organisation of the monetary system were,
as a rule, assigned to a public institution, i.e. the central bank.
The central banks’ origins vary from one country to another. Some
of the oldest central banks were originally state banks which granted
loans to the state and managed state assets. Others were set up
to enhance the stability of the banking system and to counteract the
frequent bank panics.


If retail traders and companies have been burnt the the big boy's pension/hedge funds will be in the same boat and the class actions are sure toi follow, In my view this one has a long way to run. If court cases go against the SNB then it may well have been cheaper for them to defend the 1.20.

Anybody have any views.

No chance. Those wiped out and this includes brokers only have themselves to blame. Pure greed on their part. Most reputable brokers changed the margin requirements some time ago for chf pairs. This was rumoured in the industry in the run up to the news.

The lack of liquidity could have caused issues if you were trading at the point of the spike on both sides. FAT TAILS posted a chart showing a breakout from a channel of some kind. If you had a limit order to capture that breakout you would have been filled 1400 pips away from your order. If it had a bracket limit for take profit from your original entry say 200 pips away that too would have been instantly executed leaving you 1200 pips in the hole. This happened to several traders who with 100k accounts taking advantage of leverage lost millions! Forex can be a dangerous game! Buyer beware!

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  #38 (permalink)
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Swiss Market Index YTD Performance:
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USD/CHF
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EUR/CHF
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Interestingly enough the Swiss Market Index appears to have recovered from the surprise event by the SNB. In addition, the USD/CHF is well on its way as well.

However, I believe that there must be some lucrative plays to short Suisse stocks that are facing anti competitiveness (OPEX etc) due to a strong CHF in this environment.

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