I think a logical move for most bucket shops would be to start introducing variable margin on each pair. It's nonsensical to offer 50 to 1 leverage on the EUR/USD and at the same time offer the same leverage on say USD/HUF. As if they have the same risk. If each of these shops would have different leverage requirements on different pairs depending on risk, a lot of this could be avoided. We saw this happen also with the Rubble. FXCM was offering the same leverage on that as say EUR/GBP. Obviously these pairs have different levels of risk.
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Post FXCM - News and the Regulatory Landscape
- Thread starter justrading
- Start date
I think a logical move for most bucket shops would be to start introducing variable margin on each pair. It's nonsensical to offer 50 to 1 leverage on the EUR/USD and at the same time offer the same leverage on say USD/HUF. As if they have the same risk. If each of these shops would have different leverage requirements on different pairs depending on risk, a lot of this could be avoided. We saw this happen also with the Rubble. FXCM was offering the same leverage on that as say EUR/GBP. Obviously these pairs have different levels of risk.
This makes sense given the vastly different daily ranges and the basic issue of currency risk/stability. Too much focus on profit and not enough on risk management it would appear.
The other issue which the press is not looking at while they highlight FX margins is that even for SF futures, some accounts would have blown out. CME raised margin requirements twice since the SNB announcement, but the original was $2,250 to control a contract of 125,000 Swiss francs. More than enough there to wipe out the unwary.
What about the other side who made a lot of billions? Anyone know of who benefit the most from this move.
Great question, but so far nothing I've seen. Apart from those where brokers went bust when accounts blew out, the other counterparties would collect.
The way the SNB expanded the monetary base capping the Swiss Franc makes Bernanke seem relatively conservative. The only wonder is it lasted so long.
http://uk.businessinsider.com/swiss-national-bank-loses-60-billion-francs-2015-1
http://uk.businessinsider.com/swiss-national-bank-loses-60-billion-francs-2015-1
"Other hedge-fund firms suffering Swiss franc shock include the London-based Comac Capital LLP, managing $1.2 billion, and the South Norwalk, Connecticut-headquartered Discovery Capital Management LLC, managing $14.7 billion, the Journal reported."
http://m.ibtimes.com/swiss-franc-sh...pital-global-hedge-fund-victim-report-1786900
http://m.ibtimes.com/swiss-franc-sh...pital-global-hedge-fund-victim-report-1786900
Pepperstone to bail out Alpari U.K.?
http://www.ft.com/intl/cms/s/0/0d9a.../feed//product&siteedition=intl#axzz3PH7xENKL
http://www.ft.com/intl/cms/s/0/0d9a.../feed//product&siteedition=intl#axzz3PH7xENKL
Not news, but some interesting thoughts on this difficult situation.
http://www.economist.com/blogs/buttonwood/2015/01/risk-and-finance-sector
http://www.economist.com/blogs/buttonwood/2015/01/risk-and-finance-sector
"Citigroup, the world’s biggest currencies dealer, lost more than $150 million at its trading desks, a person with knowledge of the matter said last week. Deutsche Bank lost $150 million and Barclays less than $100 million....."
Add to this a single hedge fund losing most of $830 million and the tally of the damage is piling up. Still not answered is who were the counterparties who profited.
http://www.bloomberg.com/news/2015-01-19/bank-losses-from-snb-surprise-seen-mounting.html
Add to this a single hedge fund losing most of $830 million and the tally of the damage is piling up. Still not answered is who were the counterparties who profited.
http://www.bloomberg.com/news/2015-01-19/bank-losses-from-snb-surprise-seen-mounting.html