The Foreign Exchange Market’s Black Thursday: Industry Losses May Surpass $1B
The "Black Swan" day is swinging a big broom across the foreign exchange industry, reshaping it as we know it

With a variety of official announcements about expected losses, and claims about business as usual, the reality today is that the situation across the industry is anything but business as usual.
Business models are put into question, bankruptcy rumors are swirling through the market, while the bulk of the industry is concerned about a domino effect from failing brokers.
Other brokerages are looking at acquisition targets in the aftermath of the debacle with some publicly listed companies also falling under the radar, while the prospects of others going public dimming in the aftermath of the Swiss National Bank carnage.
Join the iFX EXPO Asia and discover your gateway to the Asian Markets
The removal of the exchange rate cap on the Swiss franc has certainly been more impactful that its instigation in September 2011. In fact, the only comparable black swan event is the European Monetary System (EMS) break up in 1992.
Forex Magnates has talked to a variety of foreign exchange industry sources in order to determine the prospective impact to the industry. There’s been a small number of official announcements with specific numbers, but from what our reporters have gathered losses for the brokerage industry are likely to surpass $1 billion.
For a list of brokers’ losses updated in real time see here.
On the major liquidity provider front, Deutsche Bank has stated that it lost close to $150 million due to the extreme volatility of the Swiss franc, while sources cited by the Dow Jones newswire are reporting that Barclays lost tens of millions.
Interactive Brokers has outlined that its losses are close to $120 million. Considering the number of venues which haven’t announced any figures is quite massive, the number in fact could be way bigger than $1 billion.
Market-making foreign exchange brokers fared much better than others in the aftermath of the Swiss ‘black swan’ event. However, their profits are not proportionate to the amount of losses which were suffered by those brokerages sending client orders to the broad currency market.
The main issue which foreign exchange brokerages are facing is the ability to collect negative account balances from their clients. While retail clients are protected by most brokers’ contractual obligations from a negative account balance, a number of firms have remained on the hook with their liquidity providers facing substantial losses.
An issue which still hasn’t been discussed much, is further up the ladder – how much of the funds will the liquidity providers themselves be able to collect from their broker and other institutional clients?
An offshore brokerage using a liquidity provider on mainland, can literally close its shop within a day and disappear, nowhere to be found. A number of foreign exchange high-frequency trading companies have suffered immense losses, while rumors about hedge funds going belly up are already creeping through the industry.
Foreign exchange brokerages which held collateral with companies facing insolvency, (such as Alpari UK) will in turn suffer losses, as these funds are not in segregated accounts and do not benefit from protection by the regulatory agencies.
Industry Insiders Speaking
One of the major Swiss brokerages, Dukascopy, explained, “We have safely passed through the CHF dramatic price shift. It was achieved thanks to advanced execution technology, careful risk management policy and reduced leverage on EURCHF till level of 1:10.”
The brokerage reduced leverage requirements on the CHF pair last October.
“Divisa Capital is financially sound after the unprecedented events in the market yesterday. We have been on calls and emails with LPs around the clock seeking improved rates for our PoP clients that traded during the extremely volatile period, other than that we are happy to inform that our matching engines in NY4 and LD4 had record work load but performed as expected throughout the crisis,” said a company spokesperson.
Speaking to Forex Magnates, OANDA’s CEO Ed Eger, said, “At OANDA we spent yesterday, taking care of our clients and their needs. Orders and withdrawal requests were executed as usual, there were no break trades and our customers’ orders have been executed at the best possible rates.”
Suggested articles
FBS CopyTrade Launches a New Card Scanning Feature!Go to article >>
Commenting on what is the main takeaway from Thursday’s ‘black swan’ event to the industry, Mr. Eger stated, “A well capitalized company is extremely important to run a successful brokerage even in dire market conditions. The extraordinary events which we witnessed yesterday, have put us in an even stronger position and I can share with you that we are seeing 2 to 3 times higher number of new clients signing up today.”
CFH Clearing’s CEO, Lars Holst, stated, “Following the SNB announcement yesterday, CFH Clearing continues business as usual. We have fully automated systems and market leading risk management solutions.”
“In response to yesterday’s events, we have amended all our clients’ Swiss trades to reflect the fills we got back from our banks and have been in close dialogue with our clients and our banks throughout yesterday and today. CFH Clearing has also notified clients that we will increase the margin requirement for CHF pairs to 2.5%. We will review other pairs as well,” he explained.
Major Impact on the Industry Going Forward
Mr. Holst continued, “For anyone in our business, yesterday’s event is truly historical and for most of us it is difficult to comprehend. It will have a major impact on the industry moving forward. No doubt the whole industry needs to revise our view on margins and worst case scenarios for how much a major currency can move. We have to ask ourselves if this is the beginning of a new era of volatility and what we can do as an industry to prevent such devastation in the markets in future.”
FX Primus Ltd. President, Terry Thompson, shared with Forex Magnates, “Fortunately the risk management protocol we’ve had in place since Day 1 of business has held up during this unprecedented event. Our balance sheet remains strong, and while it is disheartening to see other brokers in the industry are now going through some unfortunate times as a result of the SNB intervention, I feel vindicated in choosing to focus our efforts thus far at making FXPRIMUS “The Safest Place to Trade.”
JFD’s operations remained uninterrupted and stable, i.e. “business as usual”, without any significant impact as less than 0.3% of Live Trading Accounts suffered from exposure to the CHF resulting into an insignificant amount of “bad debts”.
“JFD’s balance sheet remains very strong with a Capital Adequacy Ratio (CAR) of 24.5% set well above the minimum required of 8%. As a result, JFD is very pleased to reiterate that only 0.3% of our total client base suffered negative balances from yesterday’s exceptionally abnormal market conditions, already referred as “Black Thursday”,” said a company spokesperson.
Cyprus headquartered brokerage Iron FX stated, “IronFX Global Limited was not affected by these events due to our strong risk management systems and procedures and we continue complying well with our capital regulatory requirements under all regulatory bodies we have licenses.”
GKFX Financial Services Ltd is exploring the possibility of acquiring several brokers who have unfortunately suffered financially.
“GKFX is planning on capitalising on its strong balance sheet, global reach, and extensive product offering. We have invested in excess of $25 million in IT and operational capabilities over the last year and GKFX is in a very strong position to expand its business yet further,” the company said in a statement.
OFM’s Director of Trading, Andrew Henderson, confirmed that yesterday’s events would only serve to reinforce the perception of the company’s integrity and strength. “The statements from Alpari and others over the last twenty four hours will enhance our position in the industry as one of the most secure FCA regulated brokers.”
“Markets.com is pleased to announce that this extreme volatility didn’t impact the firm’s strong financial position. Thanks to the company’s robust risk management policies, the Company enjoyed a profitable trading day in yesterday’s session and didn’t have any negative impact from the Swiss Franc’s extreme volatility,” the company shared in a statement.
Admiral Markets’ CEO, Dmitry Laush said, “The Swiss National Bank’s unexpected and radical policy change yesterday (Thursday, 15 January 2015) has had a profound effect on many financial institutions. Forex brokers may be experiencing financial difficulties as a result.”
“While Admiral Markets Group has also been affected by these events, we want to reassure you that the effect is limited allowing the Group and its regulated legal entities to continue providing services to its clients. Further trade execution adjustments are likely to be processed on some client accounts as well as Admiral Markets accounts held with its counterparties,” Mr. Laush concluded.
Sensus Capital Markets’ CEO, Ben Florian. shared with Forex Magnates, “We would like to inform you that Sensus Capital Markets was not strongly effected by the happenings in CHF pairs yesterday. There were minimal losses, but the capital buffer was adequate to absorb those. Sensus remains a strong player in the industry and will continue to service you with our high standards as always.”
The risk management systems and liquidity providers at Advanced Markets, were able to mitigate trading losses. In addition, the firm’s well-capitalized wholesale clientele were able to cover trading losses on Swiss franc positions.
“We’ve spent the last 24 hours dealing with all of our client relationships and liquidity partners,” said Anthony Brocco, Executive Chairman, Advanced Markets Ltd. “We came through this period of unprecedented volatility cleanly and we’re on very solid ground and expect zero or minimal client losses.”
Nice table. An interesting addition would be to include the available leverage for EUR/CHF for each firm before the SNB announcement.
We can blame many of the bank LPs like Barclays for the broker losses. These banks have no price filters and were streaming junk prices over this period. It is the Banks that are responsible for this crap, why on earth did Barclays stream a price of 6 cents in USD EUR, clearly they have no volatility triggers / filters on their feed. Regulators should step in here and set rules as to how these banks price the market, this will be the only thing that will stop this. In the meantime Barclays fx desk should shut shop as they… Read more »
How ironic that what traders wanted most (a-book trading directly into the market) is what ends up costing them their accounts. Meanwhile, the B-bookers pick a plump harvest and most likely will mop up the resulting scramble of clients looking for a new broker.
All the ECN or no dealing desk brokers received a lethal injection! So who believes that market makers are the bad guys still? Market makers were able to ride this wave much more comfortably, serve their clients and continue trading without risking client funds. FXCM and FXPro have been pushing this model as better and fairer to clients for years even going as far as accusing market makers as the bad players or cowboys!! Though I tend to agree that some market makers do behave as cowboys the CHF event is a blow in the face of FXCM and their… Read more »
@Rob The DFSA appear to take a very conservative approach of multi-year testing and experimenting before broadening the scope.
@Rob The DFSA appear to take a very conservative approach of multi-year testing and experimenting before broadening the scope.
What is N/A for LMAX or Citifx? Meaning they didn’t take any losses or did they?
Can forexmagnates shed some light on how LMAX fared through this nightmare?
@ FXier He who laughs last, laughs loudest.
@Clem Thanks for the expression correction but you got my point I hope. Anything to say about the essence my friend?
I would add that Saxo Bank wants their retailer traders to pay huge negative balances.
http://www.forexfactory.com/showthread.php?p=8000528#post8000528
@Andy, yes that does have historical significance.
The question is. Who has win this money
about avatrade what means -3 +3 ?
**”While retail clients are protected by regulatory guidelines from a negative account balance, a number of brokers have remained on the hook with their liquidity providers facing substantial losses. ”** Hello please could you advise where we can find these guidelines? Do brokers have the right to go after negative balance of retail traders. We are talking about thousands of traders with 6 figure sums in negative balances because they were trading a few lots.. I think if the brokers do go legally after all these traders then surely regulation will eliminate leverage to 1:2 for future events.. If they… Read more »
*****”While retail clients are protected by regulatory guidelines from a negative account balance, a number of brokers have remained on the hook with their liquidity providers facing substantial losses. ”***** Hello please could you advise where we can find these guidelines? Do brokers have the right to go after negative balance of retail traders. We are talking about thousands of traders with 6 figure sums in negative balances because they were trading a few lots.. I think if the brokers do go legally after all these traders then surely regulation will eliminate leverage to 1:2 for future events.. If they… Read more »
Austin , I have to agree with you the pricing on BARX was atrocious . and yes they most certainly fed into the panic. On the retail side I’m surprised none of the Retail heads has taken the honorable route and tender their resignation for failing to consider worst case risk scenarios. Then again , do any of these outfits run risk models ?? I bet they will now 🙂 I applaud those firms that took measures to increase margins on CHF pairs as early as September to 8% but for the biggest losers who didn’t , could care less… Read more »
Dear forexmagnates – can you compile a list of all the forex-brokers who will actually chase retail clients for negative balances?
Saxo bank?
I think SAXO is going after 6 figure sums from the average retail joe blog.. if this is the case certainly regulators will have to change leverage rules for retail market. Also it iwll be a very nasty move by saxo to do this to retail traders..
@retailtrader
Forex brokers should not pay for the negative balances of their clients. Its completely naive to think that you can lose as much as you want and not have to pay for the bill. if this was the case then everyone would go long EURCHF and pray for the best.
@Robert, that’s exactly what some traders did. And that’s the type of trader that those rules attract.
Regulators should step in here and set rules as to how these banks price the market, this will be the only thing that will stop this.