The Important Legacy of the SNB Crisis
- A year after the black swan that shook the foreign exchange industry, brokers have learned to address risk management more carefully.
This article was written by Tom Higgins, founder and CEO of Gold-i, a global market leader in trading systems integration.
A currency crisis similar to that of last January’s Swiss National Bank (SNB) crisis won’t ever happen again. Of course, there will be other financial crises but nothing to the scale that we experienced last year because no other major currencies are pegged.
For other situations which trigger financial crises, we tend to get advance warnings that decisions are imminent and therefore the markets have time to react. Last January’s events were completely unexpected.
Brokers are in a stronger position
Tom Higgins, CEO, Gold-i
We have certainly learned lessons from the Black Swan Black Swan A Black Swan event is most commonly associated with an unforeseen calamity or event. In its most basic form, this event results in disastrous consequences for multiple parties, markets, or individuals and are characterized as extraordinarily rare in frequency, yet are seemingly predictable in retrospect. In the foreign exchange space, the most noteworthy of these events in recent memory was the Swiss National Bank (SNB) crisis which roiled currency markets back on January 15, 2015.During this in A Black Swan event is most commonly associated with an unforeseen calamity or event. In its most basic form, this event results in disastrous consequences for multiple parties, markets, or individuals and are characterized as extraordinarily rare in frequency, yet are seemingly predictable in retrospect. In the foreign exchange space, the most noteworthy of these events in recent memory was the Swiss National Bank (SNB) crisis which roiled currency markets back on January 15, 2015.During this in Read this Term event and although the fallout lasted for seven or eight months, it is now all behind us and brokerages are in a stronger position moving forward.
One of the biggest legacies of the SNB events is the requirement for a brokerage to have really strong risk analysis
Beforehand brokers assumed there was no risk if they were agency trading and covering their trades in the market. They now realise that risk is a concern and that they need to pay attention to the leverages they give to clients and get from their Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term providers.
One of the biggest legacies of the SNB event is the requirement for a brokerage to have really strong risk analysis and risk monitoring tools – and by reducing risk, brokers can make a lot more money.
One other positive change I have noticed post- SNB event is that there are now far fewer poorly funded start-ups entering the market. Today’s start-ups are well funded companies that can weather risk storms.
This article was written by Tom Higgins, founder and CEO of Gold-i, a global market leader in trading systems integration.
A currency crisis similar to that of last January’s Swiss National Bank (SNB) crisis won’t ever happen again. Of course, there will be other financial crises but nothing to the scale that we experienced last year because no other major currencies are pegged.
For other situations which trigger financial crises, we tend to get advance warnings that decisions are imminent and therefore the markets have time to react. Last January’s events were completely unexpected.
Brokers are in a stronger position
Tom Higgins, CEO, Gold-i
We have certainly learned lessons from the Black Swan Black Swan A Black Swan event is most commonly associated with an unforeseen calamity or event. In its most basic form, this event results in disastrous consequences for multiple parties, markets, or individuals and are characterized as extraordinarily rare in frequency, yet are seemingly predictable in retrospect. In the foreign exchange space, the most noteworthy of these events in recent memory was the Swiss National Bank (SNB) crisis which roiled currency markets back on January 15, 2015.During this in A Black Swan event is most commonly associated with an unforeseen calamity or event. In its most basic form, this event results in disastrous consequences for multiple parties, markets, or individuals and are characterized as extraordinarily rare in frequency, yet are seemingly predictable in retrospect. In the foreign exchange space, the most noteworthy of these events in recent memory was the Swiss National Bank (SNB) crisis which roiled currency markets back on January 15, 2015.During this in Read this Term event and although the fallout lasted for seven or eight months, it is now all behind us and brokerages are in a stronger position moving forward.
One of the biggest legacies of the SNB events is the requirement for a brokerage to have really strong risk analysis
Beforehand brokers assumed there was no risk if they were agency trading and covering their trades in the market. They now realise that risk is a concern and that they need to pay attention to the leverages they give to clients and get from their Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term providers.
One of the biggest legacies of the SNB event is the requirement for a brokerage to have really strong risk analysis and risk monitoring tools – and by reducing risk, brokers can make a lot more money.
One other positive change I have noticed post- SNB event is that there are now far fewer poorly funded start-ups entering the market. Today’s start-ups are well funded companies that can weather risk storms.