The unpegging of the CHF sent massive shockwaves across the FX trading world, so it’s no surprise the stories that made the most impact on the forex industry this past week involved the aftermath of the crisis.
Lists – The Broad View
Over the passing week, a few key lists compiled by Forex Magnates proved critical for brokers and traders following the changing landscape of the industry at this pivotal moment.
The first list showed the direct effects the EUR/CHF meltdown. We detailed how much each broker lost, who is looking to take over failing competitors and who is looking to get bought out of the market.
The second list of the week, called “Are You Covered?,” addresses traders’ demands to know which brokers will forgive negative balances and won’t chase them for the money they lost beyond their deposits.
The third list of the week showed the maximum leverage changes at the different retail brokers ahead of the ECB QE announcement and the overall risk management failure.
Struggles at Alpari UK
On Monday it was revealed that disagreements between the shareholders of Alpari UK led to a failure in reaching a deal to sell the brokerage, and the firm was placed under KPMG’s Special Administration. The auditor team will try to find a buyer for the broker themselves in a last effort to save the business, or KPMG will have to oversee the distribution of the company’s funds and assets.
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One of the most interesting updates to this story is the exclusive comment of Andrey Dashin, the majority shareholder of the firm, about Alpari UK’s insolvency, saying he tried to shut down the broker a year ago already.
FXCM to Be Bought out Itself?
Speaking about FXCM, besides the surprising reports of a bid to buy Alpari UK with the excess bailout funds the firm got from Luecadia, the broker made it into headlines with other news.
Two US law firms have publicly stated that they are investigating FXCM for possible violations of the Securities Exchange Act. Owners of shares are believed to be in discussions with the attorneys as investigations into the firm come on the back of the massive price drop on Friday the 16th, which saw the stock diving 90% and, consequently, being halted by authorities.
In a move out of left field, Charles Schwab Corp. has emerged as a dark horse candidate to buy out shares of FXCM (NYSE:FXCM) with a premium of $5.25 per share being seen as a plausible figure.
Ultimate Bucketshops – Banks
In an interesting analysis of losses seen by retail STP/ECN brokers, Ron Finberg shows that the biggest market makers are in fact the banks. The CHF losses are a very telling indicator, as non-dealing desk brokers pass all client risk to liquidity providing counter-parties, while market makers warehouse customer trades internally and minimize external hedging.