January 16, 2015

Swiss Franc Surprise Causes FXCM a Big Problem

First of all, here's a screenshot from FXCM's flavour of MetaTrader 4 on January 15th 2015 :

The cause of the big gap was the following announcement from the Swiss National Bank at 9:30 GMT this morning:

The Swiss National Bank (SNB) is discontinuing the minimum exchange rate of CHF 1.20 per euro. At the same time, it is lowering the interest rate on sight deposit account balances that exceed a given exemption threshold by 0.5 percentage points, to −0.75%. It is moving thetarget range for the three-month Libor further into negative territory, to between –1.25% and−0.25%, from the current range of between −0.75% and 0.25%.

Shortly after the surprisingly sudden descent of the Swissie FXCM issued a press release, which reads as follows:

FXCM (NYSE:FXCM) an online provider of forex trading and related services worldwide, announced today due to unprecedented volatility in EUR/CHF pair after the Swiss National Bank announcement this morning, clients experienced significant losses, generated negative equity balances owed to FXCM of approximately $225 million.

As a result of these debit balances, the company may be in breach of some regulatory capital requirements.

We are actively discussing alternatives to return our capital to levels prior to today's events and discussing the matter with our regulators.

So much for the benefits of "No Dealing Desk"?

Tags: Franc, FXCM, Jefferies, MetaTrader, NDD, SNB

Filed under Brokers by Jim

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Comments on Swiss Franc Surprise Causes FXCM a Big Problem

January 16, 2015

Jim @ 2:37 pm

Perhaps not unsurprisingly FXCM's shares on the New York Stock Exchange have taken a bit of a tumble:

Note that according to the NYSE web site trading in FXCM's shares is currently suspended, with a bid/ask of 1.47/1.50. Compare that to yesterday's last price of $12.63 and a 52 week high of $17.97.

Jim @ 4:06 pm

According to Bloomberg:

Jefferies Group is in talks to give FXCM Inc. (FXCM) a $200 million cash infusion, extending a lifeline for a retail currency brokerage hobbled by the Swiss central bank’s decision to let the franc trade freely against the euro, people with knowledge of the matter said.

Jim @ 8:49 pm

It has been announced in a press release that:

Leucadia National Corporation (NYSE: LUK) and FXCM (NYSE: FXCM) today announced that Leucadia would be providing $300 million in cash to FXCM and its subsidiaries (collectively "FXCM") that will permit FXCM to meet its regulatory-capital requirements and continue normal operations after yesterday’s loss of $225 million due to the unprecedented actions of the Swiss National Bank. Under the terms of the agreements, Leucadia is investing $300 million in cash into FXCM in the form of a $300 million senior secured term loan with a two-year maturity and an initial coupon of 10%. The term loan obligations are guaranteed, on a secured basis, by certain of FXCM's domestic subsidiaries. In addition, Leucadia will receive, in the event of a sale of FXCM or its subsidiaries, a certain percentage of the sale proceeds and, in the event FXCM makes other distributions on account of its equity, a corresponding payment for its own account. This transaction is expected to close this afternoon.

Jefferies Group LLC is a subsidiary of Leucadia National Corporation.

January 20, 2015

Jim @ 2:57 pm

FXCM shares are trading on the NYSE once again today. Here's how the 5 day chart looks at the moment:

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