A handful of brokers, including GAIN Capital and Saxobank, took it upon themselves last year to raise margin requirements on trading EURCHF, up to 5%. That definitely turned out to be a smart decision.
More from GAIN today on volatility of Swiss currency.
Great newsssssssss… i wonder if my broker fxpro.co.uk can do same. I just received a mail from avatrader that they are gonna fill up the levels for all executed trades during the SNB market turmoil. Am contacting my broker ASAP.
Here is the mail…
Dear Client,
As you probably know, the Swiss National Bank removed the floor of 1.20 on the EURCHF yesterday at 9:30 GMT.
Following the announcement, there was no liquidity on the CHF pairs and the EURCHF market fell from the floor of 1.2000 to 0.95-1.00, and then further through 0.85-0.90, and liquidity finally returned at prices between 1.03-1.04, all according to the Electronic Broking Services (EBS) .
AvaTrade is applying fill levels for all executed trades/orders which occurred between the times of 09:30:00 GMT to 10:50:00, with a EURCHF price of 1.0450. For all other CHF pairs, the execution rate will be calculated and the trades/orders will be adjusted by using the EURCHF price from the above and the relevant 3rd currency price vs EUR at the time.
AvaTrade is pleased to confirm that yesterday’s SNB statement and Swiss Franc volatility had no material effect on the company’s strong financial position.
If you have any questions please do not hesitate to contact our customer care team.
Regards,
AvaTrade Team
Especially when the dodgy Saxo bank if we can call it “a bank” decided to re-adjust the price they are going to fill their customers few hours after the event…!
You seems to be mixing trading limit with risk or/and losses.
My broker comment:
On January 15th 2015, the Swiss National Bank announced the removal of the minimum level between EUR and CHF at 1.20 (“the floor”) after more than 3 years. This caused the EURCHF to fall more than 20% within minutes.
Back in November 2014, xxxxxx had already anticipated the possibility of such events. Consequently, we decided at the time to increase the margin required on our CHF pairs by a multiple of 16.
Thanks to this measure Xxxxxxxx was able to protect its clients by substantially limiting their losses. Hence by protecting our clients’ interests, we protected the interests of the company as a whole.
Xxxxxxxs proud to say we did not suffer any kind of negative impact as a result of the SNB announcement and preserve our name as a trusted and secure provider.
Xxxxxxxxis happy to answer any questions regarding these events. Please, don’t hesitate to contact us.
Trading limit is supposed to manage risk exposure, but in a gap market no risk control measure works like it should.
Regarding Saxo, yes I saw that as well, got their email. Very high class to decide later which price they feel like giving their traders… I closed my account with them a few months ago because I was sick of waiting for better trading software that apparently will never come.
My broker (Pepperstone) did the same too and with the amount of SLs that were just below 1.20, price was never going to stop at 1.995 if it broke below 1.20. It looks like a massive oversight that some brokers did not research what the removal of the EURCHF peg could do to their business because of the lure of earning EURCHF swap for a few weeks/months. Like I read somewhere, the reward was never worth the risk, especially for a broker.
I think we can all expect wider spreads and lower leverage in the near future
As traders we can’t simply depend on our dealers to execute our trades. We must also filter out set-ups that we have reason to believe our dealer cannot execute. I need to develop some set of rules that would do so. So far, the easy one is the “don’t trade currencies with pegs or floors”. Perhaps I might also avoid central bank notes with negative interest rate policies (a clear sign of desperation).
My real error in this deal was thinking that if the SNB made a change the move would be thousands of pips over days or weeks not in an hour with no execution. I was poised with orders to benefit from a move over days in a liquid market.
Any other ideas would be great…
Im planning to avoid big or overnight euro trades next week, at least until the ecb announcement on Thursday. Might scalp the odd trade, but nothing I cant get out of quickly
[QUOTE=“Arbitrager on Acid;677613”]As traders we can’t simply depend on our dealers to execute our trades. We must also filter out set-ups that we have reason to believe our dealer cannot execute. I need to develop some set of rules that would do so. So far, the easy one is the “don’t trade currencies with pegs or floors”. Perhaps I might also avoid central bank notes with negative interest rate policies (a clear sign of desperation). My real error in this deal was thinking that if the SNB made a change the move would be thousands of pips over days or weeks not in an hour with no execution. I was poised with orders to benefit from a move over days in a liquid market. Any other ideas would be great…[/QUOTE]
You will be able to avoid any such moves like this in the future by avoiding having trades or orders open during central bank events such as speeches, rate statements and decisions, and monetary policy minutes. These are easy to avoid by simply pulling up a news calendar.
The only other possible catalyst for such a move would be an extreme and unforeseen act or God (giant solar storm, giant meteor strike, giant earthquake), or an act of war between one of the super powers (crippling cyber attack, or nuke). Any of these events would still probably not cause the type of slippage seen yesterday as long as stops were in place at the time of the event. Plus these events would be absolutely unpredictable and could be put out of mind in trying to develop a trading plan.
Know thy central banks and their modus operandi.
The problem here was not necessarily the floor, it was the penchant of the SNB to make unscheduled releases. History has shown that the institution of the floor in 2011 was unscheduled from what I read a while back and the interest rate cut on Dec 18 was unscheduled too, and so for me that was a warning sign. Now CHF is a free floating currency but at some stage in the future, if EUR survives, the SNB may peg this thing again and the drama would happen all over again but in a limited way since not everyone would have stops in a fixed area.
So in all honesty, the only way to survive this and other unforeseen terror acts is by not speculating or trading the open market.
Trading involves risk and trading a currency that is being kept in place artificially by a central bank means potential for even higher risk.
Most other currencies usually traded in the markets are dynamic and as such you are not going to see these kinds of moves so just keep calm and keep on trucking.
There is absolutely nothing an individual investor could have done to protect themselves from this other than not trading the CHF all together.
No amounts of stop loss or risk management is going to safe you when there is 0 liquidity in the market.
If you read some of the reports from the different brokers and liquidity providers they all say the same thing that at the time the news came out there was literally 0 liquidity in the market place hence the massive move.
I see some people complain about brokers adjusting trades after the fact but keep in mind most of the time this is to clients advantage.
I saw an interview with Saxo Bank for example where they stated they had been in contact with their liquidity providers all day to figure out if they could get better fills for their clients.
Could of course be all bs etc but given the extraordinary situation that took place I don’t see a reason to doubt it.
This event is not something you should blame your broker about you should instead blame yourself and the SNB.
Trading involves risk and slippage is the name of the game when big announcements happen.
[QUOTE=“aceofpips;677624”] Know thy central banks and their modus operandi. The problem here was not necessarily the floor, it was the penchant of the SNB to make unscheduled releases. History has shown that the institution of the floor in 2011 was unscheduled from what I read a while back and the interest rate cut on Dec 18 was unscheduled too, and so for me that was a warning sign. Now CHF is a free floating currency but at some stage in the future, if EUR survives, the SNB may peg this thing again and the drama would happen all over again but in a limited way since not everyone would have stops in a fixed area. So in all honesty, the only way to survive this and other unforeseen terror acts is by not speculating or trading the open market.[/QUOTE]
I can’t remember them raising rates or announcing big monetary policy events unscheduled. It will almost always be scheduled, what action they take at the scheduled meeting may be unexpected though.
The only time I’ve seen truly impromptu rate changes is to combat a currency crisis, like Russia is dealing with… And even at these times a bank typically gives an hour or so heads up to the media that they will be making an announcement.
Turkey last year also had very large impromptu rate hike to defend their currency… Caused lots of volatility but no where near the vacuum in liquidity that would cause stops to slip by hundreds of pips.
The unscheduled events actually seem to cause less slippage as you don’t have as many traders waiting to hit the buy sell button at a specific time. Takes a bit longer for everyone to react, therefore slippage is less.
Their rate cut on December 18, 2014 was unscheduled. Their scheduled rate announcement was a week earlier on December 11 but, for reasons best known to them, they did not announce the rate cut then
True… I guess it was “unscheduled”. I remember my news feed giving a heads up they were going to be making an announcement about an hour beforehand though. But yeh you are right.
Was Thursday’s announcement part of a pre-scheduled event? I don’t see anything on any calendars about it being scheduled. Perhaps it was and I am missing that.
For a long-term rule, I can’t get in and out of the market based on such calendars. I can only change my orders once a day and I need to take positions that work out over many days, weeks, or months with stops as wide as 10-day and 4-week price ranges.
I would keep a lookout for any broker reducing leverage for certain pairs. If they’re scared, I guess we should be too!
Now imagine if the EUR went bust.
I currently trade:
Aussie, Loonie, Dollar, Euro, Kiwi, Pound, Swissie, Yen, Yuan
Yuan is not free-floating, China could easily face a crisis soon, and they would probably have no problem pulling a stunt like the swiss, so after this shix I guess I am going to quit trading the yuan. Perhaps I could trade the krone? the krona? the zloty? the friggin’ peso?
im lucky i havent traded in some time after i lost money, makes me feel better now