thanks for that hint, i didn't think about the after hours. will have a check now.
IB loses $120M from Swiss currency move
- Thread starter MoreLeverage
- Start date
thanks again. bought some shares now and was instantly filled. let's hope for the best on monday
FXCM was open pre market , keep ticking all the way down to almost <$1, then halted for the regular trading sessions. Reopen after close.
no prob, I can wait
have a nice weekend everyone!
this weekend is presented to you by our rare guest: the black swan
have a nice weekend everyone!
this weekend is presented to you by our rare guest: the black swan
Bank Losses From Swiss Currency Surprise Seen Mounting
http://finance.yahoo.com/news/bank-losses-swiss-currency-surprise-000000705.html
The $400 million of cumulative losses that Citigroup Inc. (C), Deutsche Bank AG and Barclays Plc (BARC) are said to have suffered from the Swiss central bank's decision to end the cap on the franc may be followed by others in coming days.
"The losses will be in the billions -- they are still being tallied," said Mark T. Williams, an executive-in-residence at Boston University specializing in risk management. "They will range from large banks, brokers, hedge funds, mutual funds to currency speculators. There will be ripple effects throughout the financial system.
http://finance.yahoo.com/news/bank-losses-swiss-currency-surprise-000000705.html
The $400 million of cumulative losses that Citigroup Inc. (C), Deutsche Bank AG and Barclays Plc (BARC) are said to have suffered from the Swiss central bank's decision to end the cap on the franc may be followed by others in coming days.
"The losses will be in the billions -- they are still being tallied," said Mark T. Williams, an executive-in-residence at Boston University specializing in risk management. "They will range from large banks, brokers, hedge funds, mutual funds to currency speculators. There will be ripple effects throughout the financial system.
some more info on IB's 120m loss from Thomas Peterffy on today's earnings call:
- 80pc of the loss i.e. roughly 100m due to 5 non-US accounts, one organization (HF or whatever) and 4 individuals. One account from spain, one from HK (i believe), the other 3 each in another country.
- 75pc of the total loss not from cash FX, but Merc EURCHF futures, where exchange margin was just 1pc, and IB unfortunately did not realize the dicey peg situation and thus just charged the exchange margin.
- cash FX makes up 9pc of IB's commission revenue (this figure is unrelated to the loss; it was just asked on the call by an analyst in order to know what amount of IB's business is potentially at risk if regulators severely restrict the FX business)
- 80pc of the loss i.e. roughly 100m due to 5 non-US accounts, one organization (HF or whatever) and 4 individuals. One account from spain, one from HK (i believe), the other 3 each in another country.
- 75pc of the total loss not from cash FX, but Merc EURCHF futures, where exchange margin was just 1pc, and IB unfortunately did not realize the dicey peg situation and thus just charged the exchange margin.
- cash FX makes up 9pc of IB's commission revenue (this figure is unrelated to the loss; it was just asked on the call by an analyst in order to know what amount of IB's business is potentially at risk if regulators severely restrict the FX business)
Someone tell me if I have this right...
So the total negative balance of these 5 traders should be 80% of 120m USD which is 96m USD -> ~110m EUR (at the present rate).
To go near 110m EUR underwater, n lots RF would have to go from 550m EUR to 440m EUR value.
At the time, RF margins would have been 1500 CHF per contract to control 125k EUR, with 1500 CHF equaling 1800 EUR, or around 1.4%, 70:1. For sake of argument lets assume their entire account is being used for these trades (meaning this is the best case scenario and doesn't account for the rest of their accounts being consumed).
550m EUR == 4400 lots (125k EUR each) however, they would have had atleast 1.4% in margin req already there, so it's more like 558m EUR aggregate position, or around 4465 lots total. Each contract would have required 1500 CHF/1800 EUR margin or about 8m EUR total which jives with the 558-550m EUR difference.
20% adverse move ends up with 110m EUR negative after the fact, meaning at best case (not accounting for left over money already in accounts), 8m EUR of accounts ended up producing a 110m EUR loss (14x). If you divided that equally across all 5 traders, it's around 1.6m EUR margin / account, or 888 (heh) lots each (112m EUR notional).
So imagine you're Mr. 888 with 1.6m EUR in margin being used to squeeze out 11k CHF/9.2k EUR per tick and Mr. SNB Steamroller shows up to do some construction work by paving over your entire life.
Maybe don't swing 900 lots unless you're a bank?
So the total negative balance of these 5 traders should be 80% of 120m USD which is 96m USD -> ~110m EUR (at the present rate).
To go near 110m EUR underwater, n lots RF would have to go from 550m EUR to 440m EUR value.
At the time, RF margins would have been 1500 CHF per contract to control 125k EUR, with 1500 CHF equaling 1800 EUR, or around 1.4%, 70:1. For sake of argument lets assume their entire account is being used for these trades (meaning this is the best case scenario and doesn't account for the rest of their accounts being consumed).
550m EUR == 4400 lots (125k EUR each) however, they would have had atleast 1.4% in margin req already there, so it's more like 558m EUR aggregate position, or around 4465 lots total. Each contract would have required 1500 CHF/1800 EUR margin or about 8m EUR total which jives with the 558-550m EUR difference.
20% adverse move ends up with 110m EUR negative after the fact, meaning at best case (not accounting for left over money already in accounts), 8m EUR of accounts ended up producing a 110m EUR loss (14x). If you divided that equally across all 5 traders, it's around 1.6m EUR margin / account, or 888 (heh) lots each (112m EUR notional).
So imagine you're Mr. 888 with 1.6m EUR in margin being used to squeeze out 11k CHF/9.2k EUR per tick and Mr. SNB Steamroller shows up to do some construction work by paving over your entire life.
Maybe don't swing 900 lots unless you're a bank?
why not? it's essentially betting with IB shareholders money.