Saxo Bank's Risk Holds, as Low Leverage on CHF Pairs Enforced Since September
- Forex Magnates reached out to Steen Blaafalk, Chief Financial & Risk Officer at Saxo Bank A/S for his take on the recent fallout surrounding the SNB’s abandonment of its peg along with its impact on Saxo Bank.
Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Magnates reached out to Steen Blaafalk, Chief Financial & Risk Officer at Saxo Bank A/S for his take on the recent fallout surrounding the SNB’s abandonment of its peg along with its impact on Saxo Bank.
1. Saxo Bank was one of the first brokers to increase margin requirements on Swiss franc pairs in September, what made you anticipate the risks of the SNB dropping the floor?
I would like to stress that we were as surprised as anybody by the Swiss National Bank’s decision despite our anticipation last September and we did not foresee an actual removal this swiftly. However, the potential for this happening increased significantly the past months because of the ECB’s monetary policy, geopolitical risk and lack of policy choices for the SNB.
2. How effective have the risk controls used by Saxo Bank been during the extraordinary events which unfolded yesterday?
Effective, I would say, but this was the largest move ever in a major currency and there was virtually no Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term in the markets during the crucial hours yesterday so we have been working hard on giving our affected clients an overview, and are working closely with them to resolve their situations.
3. Do you think the yesterday's events will have long-term effects on the industry and could result in some regulatory changes to the structure of the FX market?
Yes, already this morning Saxo saw clients of other brokers transferring their accounts to Saxo. We take this as a sign of confidence in our business and operations but also, as you said, it could be an indication of long-term effects including consolidation of our industry.
Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Magnates reached out to Steen Blaafalk, Chief Financial & Risk Officer at Saxo Bank A/S for his take on the recent fallout surrounding the SNB’s abandonment of its peg along with its impact on Saxo Bank.
1. Saxo Bank was one of the first brokers to increase margin requirements on Swiss franc pairs in September, what made you anticipate the risks of the SNB dropping the floor?
I would like to stress that we were as surprised as anybody by the Swiss National Bank’s decision despite our anticipation last September and we did not foresee an actual removal this swiftly. However, the potential for this happening increased significantly the past months because of the ECB’s monetary policy, geopolitical risk and lack of policy choices for the SNB.
2. How effective have the risk controls used by Saxo Bank been during the extraordinary events which unfolded yesterday?
Effective, I would say, but this was the largest move ever in a major currency and there was virtually no Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term in the markets during the crucial hours yesterday so we have been working hard on giving our affected clients an overview, and are working closely with them to resolve their situations.
3. Do you think the yesterday's events will have long-term effects on the industry and could result in some regulatory changes to the structure of the FX market?
Yes, already this morning Saxo saw clients of other brokers transferring their accounts to Saxo. We take this as a sign of confidence in our business and operations but also, as you said, it could be an indication of long-term effects including consolidation of our industry.