Breaking: EUR/CHF Nosedives as SNB Abandons Floor, Freezing Trading Platforms
Trading platforms at a number of brokerages go haywire, with prices on the EUR/CHF ranging between 1.02 and 1.17, for
If you thought you’ve seen it all on the FX markets, the Swiss National Bank begs to differ. This morning the Swiss National Bank has decided that direct intervention in the market is an option no more, deciding to drop interest rates deep into negative territory at 0.75% and abandon the 1.20 EUR/CHF exchange rate floor.
A slew of stops have been triggered across platforms with the euro selling off massively against the US dollar. There was a gap between 1.20 and 0.80 cents in the EUR/CHF exchange rates, as some ECN platforms are currently showing the exchange rates around 0.88 euro cents to the Swiss franc.
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Brokerages are reporting that balances of a number of clients are going deep into negative territory–since 2011 the EUR/CHF exchange rate floor has been widely abused by speculators with tight stop losses to markup short-term gains hoping on an eventual move higher.
Throughout the past several years there has been an overwhelmingly heavy exposure by traders betting on continuing intervention by the Swiss National Bank to cover their positions and essentially take a “risk free” bet. As is normally the case, when it comes to markets there’s no such thing as a risk-free bet!
Some of the Agency brokers will be heavily in debt…. Its going to be an interesting next few days.
Its not really a flashcrash tho, but a rational reaction to external fundamental factors. The flashcrash appears to have been a marketstructure/technology problem. Not comparable.
Ron do you mean the CHF flashcrash? I meant to say the equity-flashcrash was solely a tech/marketstructure phenomenon, while in CHF there was a clear fundamental reason for the drop. But sure i can see how there would be problems with MMs that might have contributed in addition to that.
Would be interesting to see an analysis of the EBS orderbook during the crash. I understand its still the deepest market for CHF pairs..
I second that. If anyone is kind enough to share the EBS data between 09:30 GMT and 09:40 GMT…would be much appreciated