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Retail Landscape Continues to Shift Following SNB Move

The fallout from the Swiss National Bank’s (SNB) decision to drop the EUR/CHF peg is continuing in the retail FX market, as a further two brokers cease trading, more losses are reported and firms consider purchasing their damaged competitors’ businesses.

This week, UK-based Liquid Markets (LQD) ceased operations after it says it was experiencing “trading difficulties”. Following liaisons with the Financial Conduct Authority (FCA), the retail platform has been required to cease “any business that involves the carrying on of any regulated activities” and to terminate any existing derivatives contracts to which it is a party (whether as agent or principal).

“LQD is no longer able to enter into any transactions or carry on any other business with clients and the open positions of any existing clients in derivative transactions are being closed immediately,” it adds in a statement. The venue started operating in May 2014.

According to a senior Profit & Loss source, the regulators may now have to rethink what the appropriate amount of leverage is for the market. “Going long on CHF was a different risk to going short yet one would take, pre this issue, the same margin on either side,” the source adds. “The question is, how will this work itself through the industry? It isn’t structured to do that, so it would be a big change.”

In addition Boston Prime, the prime brokerage division of Boston Technologies, has also disabled all trading services, which it says is the “result of negative balances following [the] SNB announcement”.

Formerly known as BT Prime, the London-based firm was incorporated in 2010. Boston Technologies says it is continuing to operate as normal and is unaffected by the closure of Boston Prime.

The platform adds that it has reported its insolvency to the relevant authorities including the FCA.

The financial regulator of Cyprus, CySec, also issued a statement detailing the collective impact of the move on its supervised companies providing investment services (CIFs).

Of its 182 licensed companies, 158 were unaffected but the total losses of those affected have totalled €42.5 million.

The remaining 24 CIFs reported “some losses” but claimed these either had no effect on their capital adequacy or its effect was not significant. The regulator adds that it is closely monitoring firms for capital adequacy issues.

In related news, Swiss brokers Dukascopy confirmed it is has initiated negotiations with the administrator of bankrupt Alpari UK, in order to purchase its daughter company, Alpari Japan. “A Japanese broker would complete the Dukascopy group structure and increase its global presence in Asia,” the firm says.

It had earlier stated that it is “evaluating the possibility of purchasing the business of its damaged competitors” to boost growth.

Following the Swiss move, the platform says it opted to cover negative balances on affected client and release customers from their obligation to cover the negative balance. It adds: “Dukascopy Bank and Dukascopy Europe invite all the industry to follow the same approach to build up customers trust in the industry.”

Profit & Loss

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