Abdullah the Butcher Posted January 17, 2015 Share Posted January 17, 2015 http://www.wsj.com/articles/swiss-franc-move-cripples-currency-brokers-1421371654 Fallout from Switzerlands wildly swinging currency ricocheted around the world, triggering the collapse of some brokerage firms and hitting global banks with tens of millions of dollars in losses. A major U.S. currency broker reached a deal for a rescue package following sharp customer losses after the Swiss National Bank abruptly removed the cap on the Swiss francs value , sparking a massive rally. Elsewhere, a U.K. retail broker entered insolvency and a New Zealand foreign-exchange trading house collapsed. Meanwhile, Deutsche Bank AG and Citigroup Inc. both suffered about $150 million in losses, according to people familiar with the matter. Barclays PLC also racked up tens of millions of dollars in losses, although they totaled less than $100 million, another person said. The trading losses occurred within minutes of the Swiss central banks announcement. Because major currencies rarely move more than 1% or 2% in a short period, investors are able to borrow large sums to juice their bets. Traders can put down $50,000or even lessand make a bet worth $1 million or more. Excel Markets, which is connected to New Zealands Global brokers NZ, advertises 400 times leverage. The downside: a small adverse move can lead to a wipeout. Link to comment
deedsker Posted January 17, 2015 Share Posted January 17, 2015 People who leverage their bets deserve what they get. When you win, you win, but when you lose, it often leads to ruin. Link to comment
strigori Posted January 17, 2015 Share Posted January 17, 2015 All the more reason the wall between commercial and investment banks needs to go back up. Economies are much less prone to collapse when an investment bank goes under. Its a bit more problematic when a bank the general public keeps their money in goes belly up. 1 Link to comment
Recommended Posts