Although it was 2015 when the Swiss National Bank loosened its grip on the Swiss franc (CHF) and removed its peg against the Euro, causing hundreds of millions in losses, this week, FXCM has been victorious in a lawsuit brought against one its former clients, in relation to this exact event.
According to a court document from the England and Wales High Court (Commercial Court) filed on Monday and seen by Finance Magnates, Adrian Beltrami QC, who was sitting as a Judge of the High Court, dismissed the case brought by Target Rich International Ltd against Forex Capital Markets Ltd (FXCM).
Throughout the trial, which went for three days between the 8th and 10th of June 2020, Target Rich was seeking to regain $591,000 in losses from FXCM, a foreign exchange (forex) broker, stemming from the Swiss Franc flash crash back in 2015. According to the document, Target Rich had a stop loss order in place which was not executed as planned.
Judge: FXCM did not act negligently
However, Adrian Beltrami QC ruled that FXCM had, in fact, not acted negligently nor breached its contract with Target Rich by not executing the client’s stop-loss order.
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“…the true scope of the claim is limited to the case that FXCM was obliged to secure, yet failed to secure, the stop loss price. I have rejected the existence of any such duty, for the reasons I have given,” Adrian Beltrami QC said.
Beltrami goes on to say: “The stop loss price was set at a level of great specificity, to five decimal points. The no dealing desk model operated by FXCM for TRI placed FXCM as an intermediary between liquidity providers and its clients.
“It would not have been known at the time of the placing of the SLO whether any liquidity provider would ever make an offer at the precise stop loss price, nor whether FXCM would be able to secure that offer.
“Hence, TRI’s case must be that the SLO imposed an obligation on FXCM to take its own position at the stop loss price, and so engage in a substantively different sort of business, namely as a market maker, whether or not the corresponding price was available in the market. There is nothing at all in the contractual documents to support such a case.”