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2 FX Brokers Suffer "Significant Losses" After SNB Surprise, "In Breach Of Regulatory
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2 FX Brokers Suffer "Significant Losses" After SNB Surprise, "In Breach Of Regulatory

  #31 (permalink)
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Fat Tails View Post
Was it skill or just a gamble?

This is a question every trader asks himself at some time in his life...

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  #32 (permalink)
Market Wizard
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Herds


swinger View Post
How exactly does this work? Clients suffered losses because they couldn't unwind short CHF positions due to illiquidity or being caught off guard, and Oanda is going to make them whole? Did Oanda have a net long CHF position that they never hedged that allows them to do this?

Supposed, your statistics say that most of the sheep are wrong most of the time, what would you do as a broker?

No hedge? - No, because the retail bus guys compromise your own soundness.
Differential hedge? - Many brokers hedge the difference between customer longs and shorts to get a net zero exposure under most market conditions.
Full hedge of the customer positions? - A noneconomical solution, because you would hedge positions that are already hedged by other customers' positions.
Overhedge? - There, the matter becomes questionable, because some use their superior knowledge to multiply the hedge, i.e. they do not only protect their own financial rating but explicitly operate against their customers.

So, you should at least be aware which way your broker moves - trading desks vs DMA are good indicators for the inquiry.

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  #33 (permalink)
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swinger View Post
How exactly does this work? Clients suffered losses because they couldn't unwind short CHF positions due to illiquidity or being caught off guard, and Oanda is going to make them whole? Did Oanda have a net long CHF position that they never hedged that allows them to do this?

Only my opinion: Maybe the negative balances generated as a result of this move is not worth (economcally) the bad publicity they would get chasing the debit customers, while it allows them to look good in lieu of the brokers that will pursue their debit customers. Again, this is just an assumption, never the less, a good gesture on their part.

Additionally, some brokers have managed risk better, because they did not provide same leverage that most are accustomed in FX trading, which could be very high for some traders.
Kudos to Gain, that came out very positive: Gain Capital Reports Profits From FX Volatility - MoneyBeat - WSJ

Matt

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Last edited by mattz; January 18th, 2015 at 12:33 AM.
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  #34 (permalink)
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Global Fund of Everest Capital

According to bloomberg the Global Fund (Main Hedge Fund) of Everest Capital lost all 800 Mio $ and is wiped out.

Swiss Franc Trade Is Said to Wipe Out Everest?s Main Fund - Bloomberg

GFIs1

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  #35 (permalink)
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Where there are losers..

there must be winners of at least the same amounts! The money is
still here - but in others pockets.
We only see the broken parts of the economic coming slowly up to the surface.
The winners are not seen publicly.
This is part of the game.

GFIs1

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  #36 (permalink)
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@GFIs1 ...you live in Switzerland so you have some chf as do I. What are you going to do with them? I still didn't bought eur because my view is can't go back to 1,2 with the current outlook and if pull back in a 1,1 1,15 range I would sell more eur.

But nobody knows what draghi will say to the next meeting and even if a QE is given for granted markets can be unpredictable on how they will react on it, they either may like it or be disappointed because expect and are pricing more.

So a good money management rule would suggest to sell at least half position, wait the meeting and then make another valuation. I think that under 1 against eur Switzerland economy can suffer a lot, nevertheless it could also go down up to 0,8 and after that SNB could start buying eur as an extraordinary measure, so I think this is a scenario to consider too.

I really have some strong doubts on what doing, what is your view?

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  #37 (permalink)
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montanajtt View Post
@GFIs1 ...you live in Switzerland so you have some chf as do I. What are you going to do with them? I still didn't bought eur because my view is can't go back to 1,2 with the current outlook and if pull back in a 1,1 1,15 range I would sell more eur.

But nobody knows what draghi will say to the next meeting and even if a QE is given for granted markets can be unpredictable on how they will react on it, they either may like it or be disappointed because expect and are pricing more.

So a good money management rule would suggest to sell at least half position, wait the meeting and then make another valuation. I think that under 1 against eur Switzerland economy can suffer a lot, nevertheless it could also go down up to 0,8 and after that SNB could start buying eur as an extraordinary measure, so I think this is a scenario to consider too.

I really have some strong doubts on what doing, what is your view?

OK - the situation (my view only) is easy to describe: As long as mister SNB Jordan says it overshooted after the lift off the support - this will not be true. Prices will not come back easily. As nearly all swiss end clients bought the same products as some km behind the customs and paid up to 30% more - they are happy things are settling and they get the products reasonably priced. I mean they paid for years much more than all in other countries.
Recession or not will be of no big interest for most of the swiss.
Now to the economic view: Money flows into save havens - always. Looking for stable ground. This is given in Switzerland.
Thus the EUR will fall further to important currencies in the mid term. Quite a lot of money set into the Euro will be taken out and this weakens the Euro even more.
Many funds are not allowed to take high risks so they need to reduce positions with higher risks and move them in shallow water. Many EUR investments will be soon new validated and can come out as high risk.
Real losing countries are to be found in the east of Europe - especially Poland Romania and other where private people
made investments (houses and others) in swiss francs. They will no longer can pay back. And all these debits are directly connected with the Euro.
As economist I am always for having free markets that find the best price at any given moment. As long as a virtual
limit is set (like the virtual 1.20 limit on EURCHF) it does distort markets - for investors, funds, for exporters and for importers.
Now the dust is lifting and some new price range is to be found in this pair.
Draghi will not shake the markets very much next week - as the main explosion with shift is already over...
For the swiss franc we can be happy to be now out of further distortion (maybe) wanted to be announcements by Draghi but the downtrend will not be stopped easily (same as oil).
You asked about my investments. I will get out of all EUR positions totally. And make daytrading investing only short
time and not mid or longterm.
One last point learned: Place investments in parts - and not all with one broker.. Some more broken brokers will
be seen next week... Even if you do not lose your primary money you can first: not take it out and second:
not use it for trading in the interesting markets to come.

Hope this picture helps.
GFIs1

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  #38 (permalink)
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Thank you so much for your analysis! You added some very good points to my picture.

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  #39 (permalink)
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GFIs1 View Post
OK - the situation (my view only) is easy to describe: As long as mister SNB Jordan says it overshooted after the lift off the support - this will not be true. Prices will not come back easily. As nearly all swiss end clients bought the same products as some km behind the customs and paid up to 30% more - they are happy things are settling and they get the products reasonably priced. I mean they paid for years much more than all in other countries.
Recession or not will be of no big interest for most of the swiss.
Now to the economic view: Money flows into save havens - always. Looking for stable ground. This is given in Switzerland.
Thus the EUR will fall further to important currencies in the mid term. Quite a lot of money set into the Euro will be taken out and this weakens the Euro even more.
Many funds are not allowed to take high risks so they need to reduce positions with higher risks and move them in shallow water. Many EUR investments will be soon new validated and can come out as high risk.
Real losing countries are to be found in the east of Europe - especially Poland Romania and other where private people
made investments (houses and others) in swiss francs. They will no longer can pay back. And all these debits are directly connected with the Euro.
As economist I am always for having free markets that find the best price at any given moment. As long as a virtual
limit is set (like the virtual 1.20 limit on EURCHF) it does distort markets - for investors, funds, for exporters and for importers.
Now the dust is lifting and some new price range is to be found in this pair.
Draghi will not shake the markets very much next week - as the main explosion with shift is already over...
For the swiss franc we can be happy to be now out of further distortion (maybe) wanted to be announcements by Draghi but the downtrend will not be stopped easily (same as oil).
You asked about my investments. I will get out of all EUR positions totally. And make daytrading investing only short
time and not mid or longterm.
One last point learned: Place investments in parts - and not all with one broker.. Some more broken brokers will
be seen next week... Even if you do not lose your primary money you can first: not take it out and second:
not use it for trading in the interesting markets to come.

Hope this picture helps.
GFIs1

Da man is very right !
Finally someone I can agree with in this matter

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  #40 (permalink)
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Maybe the direction of this thread should be the leverage and margin that was used in FX trading. This could help beginner traders understand that these moves than come unexpected, could have a devastating affects where losses extend beyond their account size and risk capital.

Traditionally, FX was always an asset class that allowed smaller players to come in and trade with very little and today these kind of moves wiped out a lot of retail traders while carrying deficits. The purpose of this is NOT to delegitimize FX trading as an asset class, rather discuss what happens when you over leverage.

This could have happened in crude oil, or gold or other an index where a moves can extend beyond what traders think is normal. Black Swan events..are not so Black Swan.

Matt

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