The Swiss National Bank (SNB) Crisis occurred when the SNB abruptly announced it was abandoning its currency peg to the Euro on January 15, 2015.
The following upheaval on the forex market has led it to being classified as a Black Swan event, given its seismic impact on currency markets and the retail brokerage industry.
In particular, on January 15, 2015, the Swiss franc (CHF) quickly rose by almost 30 percent in value against most major currencies.
This lasted for nearly 45 minutes during which there was virtually no liquidity in the currency.
Consequently, this made it impossible to exit trades or for most brokerages to reconcile their exposures.
As a result, stops were not honored and most traders saw their accounts totally wiped out.
This also led to enhanced losses in the absence of negative balance protection, a particular vulnerability at this time for retail traders, which resulted in massive losses.
Lasting Impact of SNB Crisis on Retail Brokers and Traders
In addition to traders, many retail brokers were the hardest hit.
The most notable victim was FXCM, having operated as one of the largest and most reputable brokers globally.
With FXCM at risk of bankruptcy, the group orchestrated a bailout via a $300 million loan from the company Leucadia.
Several brokers lost millions, with the most notable victim being FXCM, one of the largest and most reputable Forex brokers in the world.
FXCM were seen as at risk of bankruptcy, which they avoided by taking several measures including a $300 million loan from Leucadia.
Since the SNB Crisis, the demand for negative balance protection has skyrocketed and become nearly ubiquitous.
Moreover, there has also been a push for greater awareness of the levels of risk when trading currencies that are the object of a stated peg to another currency by its central bank.
Overall, the image of forex was also changed forever, which has since been seen as more risky, relative to other investments such as stocks and commodities.
While generally moving by less than these other assets, many traders utilize higher leverage.