Estonia-based Admiral Markets AS, operating with the tradename Admirals, has issued a volatility warning to its clients who trade Swiss Franc (CHF) amid speculations on possible intervention from the Swiss National Bank (SNB). According to the note, the broker cautions that such ‘potential’ actions from the SNB could increase market volatility across CHF-pegged pairs.
Among the possible scenarios, Admirals noted that strong moves and considerable gaps in market prices, especially in CHF pairs and the Swiss index, could happen due to the ongoing speculations and following the possible intervention.
Additionally, the broker commented that the following risk factors could be feasible: “Limited liquidity, which may result in much wider spreads, and an increased amount of order rejections and slippage; Reduction of available leverage; Significantly higher overnight fees (‘Swaps’); Relevant instruments and/or overexposed accounts going into ‘close-only’ trading mode without notice; Changes to supported trade sizes and trading session times; Introduction of per-account CHF exposure limits; Further changes of trading conditions of CHF or other closely related currencies on a very short or even without any advance notice to you.”
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Inherent ‘Typical Adverse Effects’
However, the Estonia-based firm clarified that such measures are “just an indication of typical adverse effects” inherent to the sharp volatility that could be triggered in the case of a black-swan scenario coming from the SNB. Further, it noted that the firm reserves the right to introduce any other temporary or permanent measures depending on the circumstances. “Finally, we remind you that stop-loss orders are a tool intended to automate your position exit routine – they are not a guarantee of a certain position exit price, and clients should still be aware of the high risk of gaps in market prices during volatile periods,” Admiral Markets added.
In the last few weeks, there have been some speculations about a possible intervention from Switzerland’s central bank on the Swiss franc to avoid CHF strengthening.