Swiss franc scraps euro peg

Generali

HAMISH_MCTAVISH wrote: »

Quite severe as it happens.... For the Swiss.


http://www.reuters.com/article/2015/01/15/markets-stocks-europe-idUSL6N0UU2OS20150115

In amongst all the Swiss trade organisations and business groups holding crisis meetings and warning of bankruptcies and rising unemployment, was this little gem in a letter from the head of watchmaker H Moser to the head of the Swiss National Bank.....

http://www.valuewalk.com/2015/01/swiss-franc-business/

Call me naive but somehow I have a feeling that buyers of Swiss watches aren't particularly price sensitive.

Thrugelmir

Generali wrote: »

What's the fall out?

Swiss economy depends on exports. As exports 65% of it's output. Overnight prices would have to rise 15% just to maintain parity.

Nick Hayek, the chief executive of the Swatch watch group – which owns brands such as Omega, Longines, Tissot and Calvin Klein watches and jewellery – said: “Words fail me …today’s SNB action is a tsunami; for the export industry and for tourism, and finally for the entire country.”

Generali

BobQ wrote: »

Great reply, I assume this is indicative of your day job. Either way, a fascinating insight into the GFC!

Thanks BobQ.

In the late 90s, part of my job was calculating margins for hedge fund clients at HSBC.

Banks really are very risk averse it's just sometimes they get blindsided as with the SNBdecision or simply make a mistake.

For example, our risk team at HSBC decided that as a bank we wouldn't hold Malay Ringgit overnight ourselves, we'd have a position of MYR0 at the end of each day. During the Asian Crisis in 1998 (?) the Malay Finance Minister went on TV to say that the MYR was no longer convertible into other currencies one Saturday. Thanks Risk Guys I thought, sensible policy.

Unfortunately, our Exotics trader had taken a client out for lunch on the Friday and hadn't come back to the office and so held a large long position in MYR over the weekend!

The banks all got together and decided on an FX rate that would be used to close out open FX trades. The trader concerned made $40,000,000 as a result of that agreement. She was told that profit would not count towards her bonus and she should consider not being fired as the upside of that trade.:D

Pincher

Some years ago, Swiss Franc mortgage was very popular in Cyprus. Apparently UK property buyers in Cyprus were sold Swiss Franc denominated mortgages because the developers had a partnership with some banks.


It looks like they have been trying to get compensation by claiming mis-selling against Alpha Bank and the developers. This rise in Swiss Francs has made it even more important to win the case.

NorthFin

Just days after the Swiss "threw Napalm on the FX derivatives" we are starting to understand the true carnage associated with the volatility. The following are just some of the headlines relating to the destructions...
Surge of Swiss Franc Triggers Hundreds of Millions in Losses
http://www.wsj.com/articles/swiss-franc-move-cripples-currency-brokers-1421371654
"Banks, brokers and individual investors were left with hundreds of millions of dollars in losses a day after an unexpected surge in the Swiss franc sent shock waves through markets."
"FXCM Inc., a major U.S. retail foreign-exchange broker, emerged as the biggest victim so far and had to be rescued by an emergency $300 million lifeline from investment firm Leucadia National Corp."
"Citigroup Inc. and Deutsche Bank AG will each lose about $150 million on the franc's appreciation, said people familiar with the firms."
"Among hedge funds suffering losses: Discovery Capital Management LLC, a South Norwalk, Conn., firm that manages $14.7 billion, and Comac Capital LLP, which oversees $1.2 billion in London."
END
Barclays lost 'tens of millions' of dollars on Swiss franc moves
http://uk.reuters.com/article/2015/01/16/uk-swiss-snb-barclays-idUKKBN0KP1OK20150116
"British bank Barclays (BARC.L) lost tens of millions of dollars from the volatile moves in the Swiss franc on Thursday, an industry source said on Friday."
"Several banking sources said most major banks were likely to have lost money from the unprecedented surge in the value of the franc after the Swiss central bank abandoned a cap on the currency."
END
Saxo Bank says it will revisit Swiss Trades
http://uk.reuters.com/article/2015/01/15/markets-forex-saxo-idUKL6N0UU52W20150115
"Once we are better able to establish the market liquidity, all executed fills will be revisited and amended to more accurate levels," Saxo Bank said in a statement. "This may result in a worse execution rate than the originally filled level."
END
Interactive Brokers Lost $120 Million on the Swiss Franc
http://finance.yahoo.com/news/interactive-brokers-lost-120-million-150612206.html
"Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) Due to the sudden move in the value of the Swiss Franc ("CHF") yesterday, several of our customers suffered losses in excess of their deposit with us. Such debits amount to approximately $120 million, less than 2.5% of our net worth."
END
Casualties from Swiss Shock Spread from New York to New Zealand
http://www.bloomberg.com/news/2015-01-15/new-zealand-currency-broker-closes-on-losses-after-swiss-shock.html
"HSBC Customers:"The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity," Global Brokers NZ director David Johnson said in a statement dated Jan. 15 and posted on the website of affiliated company Excel Markets. All of the firm's client funds are in segregated accounts and "100 percent of positive client equity or balance is safe and withdrawable immediately," Johnson said." END

NorthFin

Oh and another big one folds due to the bombshell....


Alpari UK Currency Broker Folds over Swiss Franc Turmoil
http://www.bbc.com/news/business-30846543
"FXCM said on Thursday it might not be able to meet certain regulatory capital requirements due to "unprecedented volatility" after clients suffered losses of $225m."
END And this is just the beginning!

With the oil price crashing also being a weapon of mass financial destruction to the derrivatives, how will the too big to fails survive? Now that they have also become too big to bail out again?

Generali

The losses are in the hundreds of millions, that is not an existentialist problem to a large bank.

The only people going bust will be some hedgies and a few bucket shops that deserve to be regulated out of existence anyway.

buglawton

'Twas quite a while ago that I posted my own misgivings about forex agents e.g. In 2008
http://forums.moneysavingexpert.com/showpost.php?p=15315179&postcount=263

"What with all the banks in trouble, not to mention half of the City financial services co's, I would be extremely wary of using a Forex co that does not somehow have a watertight guarantee behind it (similar in quality to say, ABTA is for travel). I am not aware that any such scheme exists (it ought to...) though"

Generali

buglawton wrote: »

'Twas quite a while ago that I posted my own misgivings about forex agents e.g. In 2008
http://forums.moneysavingexpert.com/showpost.php?p=15315179&postcount=263

"What with all the banks in trouble, not to mention half of the City financial services co's, I would be extremely wary of using a Forex co that does not somehow have a watertight guarantee behind it (similar in quality to say, ABTA is for travel). I am not aware that any such scheme exists (it ought to...) though"

Clients' funds should be segregated and thus safe under Client Money laws.

Unfortunately many firms, both large and small, don't bother following Client Money laws correctly.

Thrugelmir

NorthFin wrote: »

With the oil price crashing also being a weapon of mass financial destruction to the derrivatives, how will the too big to fails survive? Now that they have also become too big to bail out again?

Perhaps we are witnessing the credit bubble finally deflating. With China no longer driving the worlds growth.